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The emergence of Chinese artificial intelligence firm DeepSeek rocked US tech giants’ stocks on Monday night amid concerns that the new low-cost AI model would upend their dominance.
Tech shares plunged and chip maker Nvidia suffered falls of nearly 17% on Monday, as President Donald Trump warned DeepSeek’s emergence was a “wake up call” for existing AI giants.
Nvidia’s drop in share price marked the biggest ever one-day loss in market value on Wall Street, of about 589 billion dollars.
Just a week after its launch, DeepSeek has quickly become the most downloaded free app in the US.
It claims that its large language AI model was made at a fraction of the cost of its rivals, including OpenAI, which uses more expensive Nvidia chips to train its systems on vast swathes of data.
The announcement has raised significant doubts over the future of US firms’ dominance in AI, prompting the sharp falls for Nvidia, as well as tech giants including Microsoft, Meta and Google parent Alphabet, which are all pouring billions into the technology.
The S&P 500 dropped 1.5%, dragged down in large part by the fall from Nvidia.
DeepSeek’s claims also affected tech stocks elsewhere, with Dutch chip making company ASML falling 7% and Japan’s Softbank dropping 8.3%.
The FTSE 100 appeared resilient on Tuesday morning, rising 0.21% in early trading.
A Downing Street spokesman said the advancements show the UK must “go further and faster to remove barriers to innovation” in the AI sector.
Asked whether the Government would be open to using Chinese AI such as DeepSeek in Whitehall, the Prime Minister’s official spokesman said: “We’ve got some of the strongest data protection laws in the world and we will always ensure personal data and the operation of public services is handled responsibly and securely.
“But more broadly on the developments over the last few days, the rapid development and breakthrough of new AI models demonstrates exactly why the UK is so focused on AI and why we need to go further and faster to remove barriers to innovation here to make the UK a more competitive market.
“And whilst we’ve already got the third largest AI market in the world, we’ve got an opportunity to get ahead and do more, and that’s what our AI Opportunities action plan is all about.”
The spokesman added he would not “get ahead of specific models” when asked whether he would rule out using Chinese AI in Whitehall.
Analysts said the announcement from DeepSeek is especially significant because it indicates that Chinese firms have innovated faster despite the US putting controls on exports of Nvidia’s most powerful chips to the country.