In This Article:
Cheng Xin / Contributor / Getty Images
KEY TAKEAWAYS
-
A slew of stocks, including chip maker Nvidia, tumbled Monday after Chinese startup DeepSeek released an AI model that runs on less-advanced chips and at a lower cost than those of U.S. rivals like OpenAI.
-
Among the shares falling were those of nuclear power providers like Constellation and Vistra.
-
Broadcom's shares slumped around 17%, while Micron Technology was down around 11%.
A slew of stocks, including chip maker Nvidia (NVDA), fell Monday after Chinese startup DeepSeek released a cutting-edge artificial intelligence model that runs on less-advanced chips and at a lower cost than those of U.S. rivals like OpenAI.
The Chinese company's launch is raising questions about tech shares being overvalued and that Big Tech is overspending on their AI buildout. DeepSeek’s app was a top downloaded app on the Apple store in the U.S. Monday afternoon. (Here's more on what you need to know about DeepSeek.)
DeepSeek earlier this month said its performance was “on par with ChatGPT.” DeepSeek’s success has come despite U.S. export controls on cutting-edge chips that have hampered Chinese AI companies.
Nvidia fell more than 16% Monday, while U.S.-listed shares of Taiwan Semiconductor Manufacturing Co. (TSM) were down 13% and ASML Holding (ASML), the Dutch company that makes semiconductor-making equipment, fell about 6%.
Other chipmakers were also hit: Broadcom's (AVGO) shares slumped around 17%, while Micron Technology (MU) was down around 11%.
Even the nuclear power providers that had been seen as essential to powering AI data centers slumped: Constellation Energy (CEG) and Vistra (VST) were down more than 20% apiece.
Citi Sticks With Nvidia Buy Call
In a note published Sunday Jan. 26, Citi analysts said they were sticking with a buy rating on Nvidia, and expected AI companies to continue buying advanced chips.
“While DeepSeek’s achievement could be groundbreaking, we question the notion that its feats were done without the use of advanced GPUs to fine tune it and/or build the underlying [large language model] the final model is based on through the Distillation technique,” the analysts wrote.
"While the dominance of the US companies on the most advanced AI models could be potentially challenged... we estimate that in an inevitably more restrictive environment, US' access to more advanced chips is an advantage," they added.
Update: This story has been updated to reflect fresh share-price information.
Read the original article on Investopedia