U.S. Stocks Sink Amid Fears Over DeepSeek and Chinese A.I. Advancements

Big technology stocks experienced a sudden panic on Monday as investors became concerned about the impact of advancements in artificial intelligence by Chinese companies on the dominance of tech giants in the United States and beyond.

Nvidia suffered a significant blow, dropping 16 percent and wiping out billions of dollars in market value in a single day.

Chinese A.I. company DeepSeek has garnered attention for matching the capabilities of cutting-edge chatbots using fewer specialized computer chips than leading A.I. firms. This has led investors to reconsider the high valuations of companies like Nvidia and the substantial investments being made by companies such as Google, Meta, and OpenAI in their A.I. ventures.

Stock markets in the U.S., Europe, and Japan all experienced declines, with the S&P 500 falling nearly 2 percent and the Nasdaq dropping around 3 percent, primarily impacting tech stocks.

The repercussions were felt most strongly by companies at the forefront of the A.I. industry, including the trillion-dollar tech giants that have been driving significant gains in the stock market. Concerns have arisen about whether the tech rally has been overextended, particularly for a small group of dominant tech firms.

DeepSeek’s emergence could mark a new phase in how investors perceive A.I., potentially prompting a reassessment of risk calculations, according to Steve Sosnick, chief strategist at Interactive Brokers.

In addition to Nvidia, other chipmakers and semiconductor equipment specialists also saw notable declines as DeepSeek showcased its cost-effective and efficient A.I. technology.

The global competition in the A.I. industry is intensifying, and companies like Nvidia may face increased challenges from innovative newcomers, as highlighted by Charu Chanana, chief investment strategist at Saxo Bank.

DeepSeek’s chatbot quickly rose to the top spot in Apple’s App Store in the U.S., surpassing OpenAI’s ChatGPT. The surge in popularity led DeepSeek to temporarily restrict new registrations due to what it described as “large-scale malicious attacks” on its service.

Stocks of tech giants like Alphabet, Microsoft, and Oracle, which have significant investments in A.I., experienced declines on Monday. Companies like Meta and Apple, which have varying levels of involvement in the A.I. race, saw mixed reactions in the market.

The tech sector’s performance has been turbulent this year, with the U.S. tech industry losing value while other sectors have seen gains. This has impacted the overall performance of the S&P 500 index.

The recent disruptions have raised concerns as tech giants prepare to report their quarterly earnings, prompting analysts to question the future financial outlook amid increased global competition in the A.I. space.

The turmoil also affected utility companies catering to data centers, with Constellation Energy experiencing a significant drop in stock value.

U.S. Treasury yields fell as investors sought safe havens, leading to a rise in the value of Treasuries and a decline in the dollar’s exchange rate against major currencies.

President Trump’s focus on advancing American-made A.I. technology to compete with China has led to efforts to restrict the sale of powerful chips to rival nations.

While recognizing the potential of DeepSeek’s technology, analysts remain cautious, believing that the demand for computing power will continue to grow despite advancements in efficiency.

Danielle Kaye, Joe Rennison and Sheera Frenkel contributed reporting.