The tech market faced a sell-off on Monday as China’s AI startup, DeepSeek, raised fears about a cheaper, open-source AI model. This caused concerns about the United States’ position in AI innovation.
Nasdaq Drops 3% as Nvidia Leads Decline
The Nasdaq closed down 3%, with Nvidia’s stock plummeting 16.9%, wiping out $589 billion from its market value. Other major chipmakers like Broadcom, Lam Research, and Marvell also fell sharply. Big Tech giants Microsoft and Alphabet dropped 2% and 4%, respectively.
Despite this, some experts believe the panic is unnecessary.
DeepSeek Won’t Doom AI Infrastructure, Say Analysts
Stacy Rasgon from Bernstein called the market reaction “overblown.” She explained that DeepSeek’s efficiency improvements could actually boost demand for AI infrastructure.
“I don’t think this signals the end for AI compute needs. Innovations like DeepSeek will allow AI development to grow further,” Rasgon said.
Daniel Newman, a strategist at Futurum, agreed, citing the Jevons Paradox, which suggests that increased efficiency often leads to greater usage.
“If AI compute becomes cheaper, companies will innovate more and drive better profits,” Newman said.
Big Tech Rebounds as Fear Eases
While Nvidia’s stock led losses, companies like Amazon and Meta closed higher, rising 0.3% and 1.9%, respectively. This shows that Wall Street’s panic began to ease as analysts highlighted the long-term benefits of AI advancements.
DeepSeek Could Benefit Global Productivity
Seema Shah, Principal Asset Management’s chief global strategist, dismissed fears of a major market correction.
“The economic outlook remains strong. If DeepSeek lives up to expectations, it could improve productivity globally and boost earnings across sectors,” Shah said.
Market Summary
- Nasdaq: Down 3%
- S&P 500: Down 1.5%
- Dow Jones: Up 0.65%
Although DeepSeek caused a ripple effect in the tech market, experts believe its innovations will ultimately benefit AI development and productivity worldwide.
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