The breakthrough of Deepseek triggers panic on the stock market. The Chinese AI threatens the dominance of American tech giants and puts billions of investments like Stargate in question.
Deepseek has already surpassed Chat-GPT on the list of most downloaded productivity apps in the USA.
The hype around the new Chinese AI, Deepseek, reached its peak over the weekend, causing significant unrest among investors. They fear that American tech giants like Nvidia or Open AI could lose their dominant position in artificial intelligence.
AI, but cost-effective
The groundbreaking aspect of Deepseek is that a powerful AI can be operated much more efficiently and cost-effectively than traditional models. Chat-GPT or Gemini require enormous computational power and high-performance chips. Currently, the American chip company Nvidia has a quasi-monopoly on these. However, due to sanctions, the most powerful AI chips are not delivered to China.
According to tech experts, Deepseek could disrupt the entire AI supply chain. This sector is dominated by American chip providers and major data center operators (Hyperscalers) like Alphabet, Amazon, or Microsoft. They are investing enormous sums in expanding their AI infrastructures. According to UBS estimates, American tech companies are set to invest an additional $280 billion in AI this year.
Billions of investments at stake
Their dominance has been reinforced by the AI boom – American indices are now highly concentrated and dependent on the movements of these values. This makes the stocks of these tech companies vulnerable to setbacks. If their AI strategies are fundamentally questioned because of Deepseek, it could lead to a shift in sentiment towards American tech stocks in the market.
“The enormous resources allocated to AI are being questioned,” says tech expert Nirgunan Tiruchelvam from Aletheia Capital to Bloomberg. The strategy of American tech giants has been to maximize their AI capabilities at all costs. This justified their massive investments in AI chips and data centers.
Is Stargate already obsolete?
Deepseek’s breakthrough could also challenge the recently launched American AI initiative, Stargate. Last week, US President Trump, along with the heads of Open AI, Oracle, and Softbank, unveiled a $500 billion investment program aimed at securing US dominance in AI.
The extent to which Deepseek will impact the Stargate plans remains uncertain as little is known about Stargate so far. However, skepticism towards the “just go big on AI” approach is clearly evident. Shares of Japanese tech conglomerate Softbank lost more than eight percent in Tokyo on Monday.
The breakthrough of Deepseek comes at an unfavorable time for American tech giants. This week, Apple, Microsoft, Meta, and Tesla will report financial results and will have to address how they plan to respond to Deepseek.