The Chinese startup artificial intelligence (AI) DeepSeek “shakes” international stock markets on Monday, raising questions about America’s technological dominance.

Interest grew over the weekend about DeepSeek’s latest AI model, which is cost-effective while running on less advanced chips, calling into question the giant valuations of companies such as Nvidia, which has led the global “explosion ” of AI stock, as its chips were deemed essential to the technology. It is noted that in electronic transactions before the opening of Wall Street, the stock of the technological giant Nvidia registers up to a “dive” of 10%.

“DeepSeek shows that it is possible to develop powerful AI models at a lower cost”said Vey-Sern Ling, CEO of Union Bancaire Privee. “This can potentially derail the investment perception for the entire AI supply chain.”

DeepSeek’s AI model – founded by Liang Wenfeng – is widely seen as competitive with the latest offerings from OpenAI and Meta Platforms. DeepSeek’s app, which was praised by investor Marc Andreessen as “one of the most surprising and impressive discoveries”shows her work and reasoning as she tackles a user’s written question or prompt. Launched last week, the product is now at the top of Apple’s App Store rankings, with users praising its transparency.

DeepSeek’s product “challenges the significant capex and operational costs incurred by Silicon Valley and is the most appropriate way to approach the AI ​​trend”said Nirgunan Tiruchelvam, head of consumer and internet at Singapore-based Aletheia Capital. “It calls into question the enormous resources devoted to artificial intelligence”.

In the stock market of USANasdaq futures plunged as much as 5% and S&P 500 futures plunged as much as 2%. European stock markets also recorded losses, with the technology sector recording a 4% drop. The Nasdaq 100 and the technology sub-index of the European Stoxx 600 are heading towards the “deletion” of capitalization amounting to about 1 trillion. dollars if market losses continue.

The drop in Nasdaq futures comes at the start of a big week for corporate results from big tech companies including Apple and Microsoft. Earnings growth is expected to have slowed, while valuations remain inflated, raising concerns once again about the industry’s big rally on the back of artificial intelligence.

DeepSeek’s launch raises new doubts, challenging the notion that its AI technology China it is years behind the US equivalents. Washington’s trade restrictions had kept the most cutting-edge chips out of China’s hands, but DeepSeek’s model was built using open-source technology that is easily accessible.

“While current leaders in the space, such as Nvidia, have a strong presence in the space, this is a reminder that AI dominance cannot be taken for granted.”said Charu Chanana, chief investment strategist at Saxo Markets. “The emergence of China’s DeepSeek shows that competition is intensifying, and while it may not pose a significant threat now, future competitors will evolve faster and challenge established companies faster. This week’s earnings will be a huge test.”

In a set of tests, DeepSeek’s model outperformed Meta’s Llama 3.1, OpenAI’s GPT-4o and Anthropic’s Claude Sonnet 3.5 in accuracy from solving complex problems to math and coding, according to CNBC.

DeepSeek on Monday also released r1, a reasoning model that also outperformed OpenAI’s latest o1 in many of its third-party tests.

“Seeing the new DeepSeek model, it’s extremely impressive,” Microsoft CEO Satya Nadella said at the World Economic Forum in Davos, Switzerland, on Wednesday. “We should take developments from China very, very seriously”.

DeepSeek also had to overcome tight semiconductor restrictions the US government has imposed on China, cutting off the country from access to the most powerful chips, such as Nvidia’s H100s. The latest developments suggest that DeepSeek either found a way around the rules, or that export controls were not the stranglehold Washington sought.

Little is known about the lab and its founder, Liang WenFeng. DeepSeek was born out of a Chinese hedge fund called High-Flyer Quant that manages about $8 billion in assets. dollars, according to international media reports.

But DeepSeek isn’t the only Chinese company standing out in the AI ​​industry.

Leading AI researcher Kai-Fu Lee said his startup 01.ai was trained using only 3 million dollars. TikTok parent company ByteDance on Wednesday released an updated version of its model that it claims outperforms OpenAI’s o1 in a benchmark test.

“Necessity is the mother of invention”said Perplexity CEO Aravind Srinivas. “Because they had to find solutions, they ended up building something much more efficient.”