Nvidia, TSMC, ASML: Tech Stocks Plummet Amid DeepSeek Threat

The tech sector has been rocked by a sudden sell-off, with shares of Nvidia, TSMC, and ASML plummeting in early trading on Monday, following the launch of a new AI-powered chatbot in China. The chatbot, developed by Chinese startup DeepSeek, has sparked concerns about the competitiveness of U.S. tech companies and triggered a global sell-off.

Nvidia shares tumbled 13.60% at 05:52 a.m. ET ahead of the market open, while Netherlands-based chip companies ASML and ASM International fell 10.32% and 14.32% respectively in European trade. In Asia, Japanese chip-related stocks were broadly lower.

DeepSeek launched a free, open-source large-language model in late December, claiming it was developed in just two months at a cost of under $6 million – a fraction of the expense incurred by Western counterparts. Last week, the company released a reasoning model that also reportedly outperformed OpenAI's latest in many third-party tests.

The developments have raised questions about the amount of money big tech companies have been investing in AI models and data centers. "DeepSeek clearly doesn't have access to as much compute as U.S. hyperscalers and somehow managed to develop a model that appears highly competitive," said Srini Pajjuri, semiconductor analyst at Raymond James.

Analysts at Citi noted that while the dominance of U.S. companies on the most advanced AI models could be potentially challenged, the access these tech firms have to advanced chips poses an advantage. "Thus, we don't expect leading AI companies would move away from more advanced GPUs," they added.

The recent announcement of President Donald Trump's $500 billion Stargate AI project is a "nod to the need for advanced chips," they added.

Analysts at Bernstein expressed doubt over whether the DeepSeek tool was actually built for under $6 million, arguing that the figure does not include all the other costs associated with prior research and experiments on architectures, algorithms, or data.

DeepSeek's ability to process and analyze massive datasets in real-time makes it a formidable tool for identifying vulnerabilities in complex systems. Traditional cyberattacks rely on manually identifying weak points in networks, software, or infrastructure. DeepSeek, however, can automate this process at unprecedented speed and scale.

One particularly troubling possibility is DeepSeek's role in enhancing zero-day exploit discovery. These are previously unknown vulnerabilities in software or systems that can be weaponized before they are patched. DeepSeek could analyze vast swaths of software code and infrastructure configurations to uncover potential exploits faster than human teams or less advanced AI systems. Once identified, these exploits could be used in targeted attacks against critical U.S. infrastructure, such as energy grids, financial systems, and transportation networks, creating widespread disruption.



The DeepSeek release has raised new doubts about the long-term demand for high-end chips from companies like Nvidia and TSMC. If DeepSeek's approach becomes more widespread, it could lead to a reduction in demand for high-end chips, as companies may opt for more cost-effective solutions.

The regulatory environment, particularly export restrictions on advanced chips, can significantly influence the competitive landscape between Western and Chinese AI companies in the long run. If Chinese AI firms can circumvent or work around export controls, the intended impact of these restrictions may be diminished, leading to a more competitive landscape. However, this could also lead to a tighter regulatory environment, with further restrictions on the sale of advanced chips to China or increased scrutiny of Chinese AI companies' operations.



In conclusion, the emergence of DeepSeek's cost-effective AI models has raised concerns about the long-term demand for high-end chips and the competitive landscape between Western and Chinese AI companies. While the situation is still evolving, investors should closely monitor the developments and assess the potential implications for their portfolios.