Nasdaq Futures Slump as China’s DeepSeek Sparks US Tech Concern

(Bloomberg) — Chinese artificial intelligence startup DeepSeek rocked global technology stocks Monday, raising questions over America’s technological dominance.

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Buzz grew over the weekend about DeepSeek’s latest AI model being cost-effective while running on reduced-capability chips, casting doubt on the validity of the sky-high valuations for companies like Nvidia Corp. The Chinese firm’s product, released last week, is now at the top of Apple Inc.’s App Store rankings.

“DeepSeek shows that it is possible to develop powerful AI models that cost less,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers.”

Founded by quant fund founder Liang Wenfeng, the app’s underlying AI model is widely seen as competitive with OpenAI and Meta Platforms Inc.’s latest. Lauded by investor Marc Andreessen as “one of the most amazing and impressive breakthroughs,” DeepSeek’s assistant shows its work and reasoning as it addresses a user’s written query or prompt. Reviews on Apple’s app store and on Alphabet Inc.’s Android Play Store praised that transparency.

Nasdaq 100 futures tumbled as much as 1.9%, while contracts on the S&P 500 fell as much as 1%. The moves represent continued losses from Friday’s cash session, as US shares cooled after gains earlier in the week as President Donald Trump took office.

In contrast, stocks advanced in Hong Kong, with the Hang Seng Tech Index climbing as much as 2% ahead of Lunar New Year holidays this week. Chinese AI-related stocks including Merit Interactive Co. surged by their daily limits. Merit is among those with the clearest links to DeepSeek after stating in an earlier filing that it had incorporated the homegrown AI firm’s model into marketing.

Meanwhile, shares in the AI supply chain slumped as investors rethink their assumptions that the most advanced AI will require increasing amounts of computing power and energy. Major Nvidia supplier Advantest Corp., slid as much as 8.6% in Tokyo. Data centers shares also slipped, with Singapore-listed Mapletree Industrial Trust down 3.6%. Markets were closed for holidays in Taiwan and South Korea.