On Monday morning, Wall Street experienced a sharp decline, with major indexes plunging by 3%.

The drop was triggered by growing concerns over the valuation of top tech stocks in the U.S., following a significant development from a Chinese artificial intelligence startup.

Investors quickly reacted by dumping around $1 trillion in technology stocks during premarket trading, leading to a 1.7% drop in the S&P 500 as markets opened.

The tech-heavy Nasdaq took an even harder hit, falling over 3% in the early hours of trading.

DeepSeek’s Disruptive Technology Stirs Panic

The panic was fueled by DeepSeek, a Chinese AI startup that introduced a new chatbot, claiming it rivals the top models from OpenAI and Google—at a fraction of the cost.

This revelation sparked fears that American tech companies might be overvalued, particularly those in the AI sector.

Nvidia, which has benefited greatly from the AI boom over the last 18 months, saw a massive 11% drop as markets opened, erasing $465 billion in market value.

Broadcom, another U.S. chipmaker, also saw a significant loss of 12%, while software giant Oracle shed 8% in early trading.

Microsoft and Amazon experienced declines of 3.5% and 0.24%, respectively.

Global Markets React to the U.S. Tech Turmoil

The impact of DeepSeek’s advancements wasn’t confined to the U.S. stock market.

Global indices were also affected, with the Stoxx Europe 600 dropping 0.4% in early European trading.

Germany’s DAX saw a 1.1% decrease, while the CAC 40 in Paris dropped by 0.8%, and the UK’s FTSE 100 lost 0.3%. Dutch chipmakers ASML and ASM were also hit hard by the news, falling 8% and 12%, respectively.

Japan’s chip-related stocks, such as Advantest and Tokyo Electron, also experienced losses.

DeepSeek Overtakes ChatGPT in Popularity

Adding fuel to the fire, DeepSeek’s free AI Assistant, released just last week, has quickly become the most-downloaded free app on the Apple Store in the U.S., surpassing OpenAI’s ChatGPT.

The startup’s ability to develop a competitive AI solution using fewer Nvidia chips at a much lower cost has raised concerns about the U.S.’s ability to maintain its dominance in the AI race.

This development is seen as a major threat to American companies, especially as the global competition in the AI field intensifies.

Market Volatility Linked to Rising Concerns Over U.S. Valuations

The fallout from DeepSeek’s advancements comes amid growing concerns over the valuation of U.S. stocks.

JPMorgan Chase CEO Jamie Dimon recently warned that asset prices in the U.S. stock market are inflated, suggesting that the market is currently in the top 10-15% of historical valuations.

This warning adds to the uncertainty surrounding U.S. stocks, particularly after the market posted remarkable gains of over 20% in 2023 and 2024—a feat it hadn’t achieved since the late 1990s.

With tech stocks taking a hit, investors are left wondering whether the U.S. market can maintain its upward momentum.

This article was published on TDPel Media. Thanks for reading!

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