Chinese low-cost app tops charts, stuns AI markets

Agencies

Futures linked to the tech-heavy Nasdaq stock market in the United States tumbled yesterday as the surging popularity of a low-cost Chinese artificial intelligence model sparked a selloff in chipmaker Nvidia and other companies that stand to benefit from investments into the technology.

Chinese startup DeepSeek has rolled out a free assistant it says uses cheaper chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centers.

"It is far too early to describe DeepSeek as an existential threat to US-based AI solutions," said Richard Hunter, head of markets at interactive investor.

"It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry which has powered much of the gain seen

in the main indices over the past couple of years."

DeepSeek's AI Assistant yesterday overtook OpenAI's ChatGPT to become the top-rated free application available on Apple's App Store in the US, UK and China.

Nvidia, whose chips are the top choice for powering AI applications, dropped 12.3 percent in premarket trading, while other chipmakers such as Broadcom and Micron Technology fell 14.3 percent and 8.4 percent, respectively.

Microsoft and Meta Platforms were down 5.8 percent and 4.7 percent. Both are set to report earnings later this week, along with Apple and Tesla.

Google-parent Alphabet fell 4.6 percent, and Apple lost 0.4 percent.

AI server makers Dell Technologies and Super Micro Computer slid 8.8 percent and 10 percent.

Power firms, which are expected to see a surge in demand from energy-intensive data centers needed to develop AI technology, also slid. Constellation Energy, Vistra, and GE Vernova were down between 12.8 percent and 16.1 percent.

Meanwhile, Chinese tech firms linked to DeepSeek such as Iflytek, surged, while chipmaking tool makers from Netherlands' ASML to Japan's Advantest slumped on the threat to demand for Nvidia AI accelerators.

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 Alphabet's Android Play Store praised that transparency.

Founded by quant fund chief Liang Wenfeng, DeepSeek's open-sourced AI model is spurring a rethink of the billions of dollars that companies have been spending to stay ahead in the AI race.

"We still don't know the details and nothing has been 100 percent confirmed in regards to the claims, but if there truly has been a breakthrough in the cost to train models from US$100 million+ (HK$780 million) to this alleged US$6 million number this is actually very positive for productivity and AI end users as cost is obviously much lower meaning lower cost of access," said Jon Withaar, senior portfolio manager at Pictet Asset in Singapore.