Wall Street reacts to China's Deepseek, Nvidia loses about $400b

Nasdaq drops 2.7% as markets react to DeepSeek, a $5.6m Chinese AI rival likened to a "Sputnik moment"

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The Nasdaq fell 2.7% on Monday, leading global market declines as Wall Street reacted to the rise of DeepSeek, a low-cost Chinese generative AI venture that appears to have overtaken US companies. The Hangzhou-based start-up, which developed its AI model for just $5.6 million, has been compared to a “Sputnik moment” by venture capitalist Marc Andreessen.

Major AI players, including Nvidia, Meta, Microsoft, and Alphabet, saw significant losses, with Nvidia shedding over 11% and losing $400 billion in market value. Analysts highlighted China’s growing challenge to US tech dominance.

DeepSeek’s AI assistant is now the top-rated free app on Apple’s US App Store, raising concerns about competition from affordable Chinese AI models. This has prompted investors to reconsider valuations and capital expenditure in the sector.

Asian and European markets also slid on Monday, driven by losses in the tech sector and geopolitical uncertainty. Tokyo's Nikkei fell as chipmakers Advantest and Tokyo Electron dropped 8% and 5%, respectively. SoftBank, a key investor in US AI infrastructure, tumbled 8%.

The decline comes amid trade tensions between the US and Colombia. President Donald Trump announced steep tariffs on Colombian goods after a diplomatic standoff over deportation flights. While Colombian President Gustavo Petro initially retaliated, the dispute was later resolved.

This week, all eyes are on tech earnings from Meta and Microsoft, along with interest rate decisions by the Federal Reserve and European Central Bank, as investors brace for more market volatility.