Tech shares knocked by shock rise of Chinese AI chatbot DeepSeek
27 January 2025, 16:14
The Chinese app has soared to the top of app store charts and claims to match ChatGPT’s performance in some tasks.
Tech stocks have tumbled in the US as markets opened on Monday after a new Chinese competitor emerged in the artificial intelligence boom, potentially upending the sector.
The S&P 500 fell 1.8% in early trading on Monday, while major tech and AI-related stocks were also down, including Nvidia, which fell more than 10%, while Microsoft, Meta, Google parent firm Alphabet and Amazon also all opened down.
The drop has been sparked by the sudden rise of Chinese AI chatbot app DeepSeek, which has jumped to the top of the download charts on Apple’s App Store in the UK, US and China, sparking a rethink of the landscape of the AI sector.
Until now, the US, home to OpenAI’s ChatGPT and Google’s Gemini, but also many other leading tech firms working on AI technology, has been seen as unmovable as the global leader in AI.
But DeepSeek’s sudden emergence, and claims of performance on par with ChatGPT despite reportedly having been developed for a fraction of the cost, is leading to a re-evaluation of the AI market.
China’s access to the US-made advanced chips which are needed to power the training of AI models has been restricted since the US government bolstered restrictions on sales to China in 2021.
As a result, Chinese AI firms have begun to share their work with each other more freely and look for other ways of boosting performance – now resulting in AI models being developed which require far less computing power to run, which also means they cost substantially less than previously thought possible.
It is this backdrop which has fuelled the DeepSeek rise and sudden shake-up of the sector’s landscape.
It also comes at the start of a big week for the sector, with a number of Silicon Valley’s biggest firms due to release their latest financial results – Meta and Microsoft’s are expected on Wednesday, followed by Apple’s on Thursday.
Downing Street declined to comment on Monday’s market movements, but insisted the rise of DeepSeek did not place the UK’s AI sector “at risk of being left behind”.
The Prime Minister’s official spokesman said the UK had “significant strengths in AI” along with “some very strong players in the market” such as DeepMind.
He added: “But our strengths go much further than that and the Secretary of State and the PM set out an ambitious agenda to take advantage of our strengths, but also to ensure that the public sector is harnessing the strengths of AI and indeed the public benefit from AI in their day-to-day lives.”
