Nvidia shares fall 12% as Chinese AI startup DeepSeek triggers panic selloff on Wall Street

Market Reaction to DeepSeek's Emergence - Big technology stocks including Nvidia, Microsoft, Meta, and Tesla tumbled in premarket trading due to concerns over DeepSeek, a Chinese AI startup threatening US dominance in AI [1] - Nvidia shares plunged nearly 12% following news about DeepSeek's capabilities [1] - Microsoft shares dropped 4.1%, Meta fell 1.7%, and Tesla declined by more than 2.7% in premarket trading [4] - European chipmakers ASML and ASM International saw sharp declines of 8.9% and 13.6%, respectively [4] - Nasdaq futures tumbled 2.3%, S&P 500 futures declined 1.3%, and Dow Jones Industrial Average futures decreased by 0.9% before the opening bell [5][8] DeepSeek's Impact on AI Industry - DeepSeek, a China-based AI startup, launched a free, open-source large-language model in December, causing industry disruption [1] - The startup was developed in just two months at a cost of under $6 million, contrasting with the billions typically spent by Western tech giants on AI research [2] - DeepSeek's rapid progress has raised questions about the efficiency and cost-effectiveness of AI research investments by leading US firms [6] - Analysts note that DeepSeek's model appears highly competitive despite having less computational power than US hyperscalers [6] US AI Leadership and Strategic Investments - US companies maintain a significant advantage in AI due to access to the most sophisticated chips, despite DeepSeek's technological strides [7] - The US government is reinforcing AI leadership, with President Trump announcing a $500 billion AI initiative called Stargate [9] - The Stargate project involves top firms such as OpenAI, Oracle, and SoftBank, highlighting the strategic importance of advanced chips in maintaining US competitiveness in AI [10] Semiconductor Industry Impact - The emergence of DeepSeek triggered a global sell-off in chip companies, particularly impacting semiconductor firms [3] - Nvidia, a key player in AI-driven chip design, saw its shares plummet 11.8% before the market opened on Monday [3][11]