The Chinese “DeepSeek” shakes the throne of “Silicon Valley” and hits the technology giant with trillions of losses

Chinese AI startup DeepSec(DeepSeek) Global technology markets rose on Monday, raising doubts about US technology dominance.

According to Bloomberg, the hype around Deep Sec escalated over the weekend due to a new artificial intelligence model developed by the company, which is cost-effective and can be run using less advanced chips, raising doubts about the high valuations of companies such as NVIDIA. Which led the global artificial intelligence stock boom thanks to its chips that are considered fundamental to this technology. Shares of Nvidia, which is based in Santa Clara, California, fell by more than 10% in pre-market trading on Monday, which could become the largest erasure of the market value of a single company in history if the session ends at those levels..

Nasdaq 100 futures fell 5.2% Monday morning US time, the largest intra-session decline for those contracts since August. While S&P 500 futures contracts fell by 2.4% at 06:15 AM New York time..

In Europe, technology stocks led the market’s losses, as ASML Holding shares fell(ASML Holding) Manufacturer of semiconductor equipment by up to 12%. The index also rose “Cboe” Which measures stock volatility.

Trillion losses in technology stocks

If these losses continue, the Nasdaq 100 and Stoxx 600 indices will decline(Stoxx 600) The European sub-technology sector may witness a decline in market value of about $1.2 trillion.

said Fei Cer Ling, Managing Director at Union Banker Private(Union Bancaire Privee):DeepSeek shows that it is possible to develop powerful AI models at lower costs. This could undermine the viability of investing in the entire AI supply chain, which relies on high spending by a handful of giant companies“.

About 278,000 Nasdaq 100 futures contracts were traded at 06:18 a.m. New York time, which is equivalent to about three times the 30-day average trading for this time of day, according to data compiled by Bloomberg..

The AI ​​model from DeepSec, founded by quantitative hedge fund head Liang Wenfeng, is considered a strong competitor to the latest releases from OpenAI and Meta Platforms. Investor Marc Andreessen described the model as “one of the most remarkable and astonishing achievements“.

An application is characterized by its presentation of how it works and the logic it follows while processing users’ written queries or requests. The model was launched last week, and topped the rankings of Apple’s App Store, where users praised its transparency.

Chinese AI companies are rebounding

This also favored the shares of Chinese companies related to artificial intelligence, as shares of Merit Interactive jumped(Merit Interactive) Included in the mainland daily maximum. The company is considered one of the most prominent people associated with “Deep Sec” after it stated in previous documents that it had integrated the company’s local artificial intelligence model into its marketing activities. In Hong Kong, the Hang Seng Index of technology stocks rose by about 2% before the Lunar New Year holiday this week.

By contrast, shares of artificial intelligence companies fell elsewhere in the world as investors reevaluated assumptions about computing and energy capabilities. Siemens Energy shares fell(Siemens Energy)one of the few companies benefiting from artificial intelligence in Europe, by 22%%.

For his part, Nirgunan Tiruchelvam, Head of Consumer and Internet Department at Alethea Capital, said:(Aletheia Capital) In Singapore, he said: “The Deep Sec model poses a major challenge to the theory that the huge capital and operating expenditures incurred by Silicon Valley are the most appropriate way to keep pace with the trend in artificial intelligence. It raises questions about the huge resources that have been allocated to this sector.”“.

Watch the profits of technology companies

The decline in Nasdaq futures coincides with the beginning of a week full of earnings results for major technology companies, including Apple and Microsoft. The pace of earnings growth is expected to slow, while valuations remain high, raising concerns again about the significant rise witnessed in the sector due to artificial intelligence..

The Nasdaq 100 trades at a P/E of 27 times, compared to its three-year average of 24 times. As for Nvidia, it is trading at 33 times, which is slightly lower than its three-year average..

The launch of the “Deep Sec” model casts a new shadow of doubt, challenging the prevailing idea that China’s artificial intelligence technology is years behind its American counterparts. Trade restrictions imposed by Washington also prevented China from obtaining the most advanced chips, but the “DeepSEC” model was built using easily accessible open source technology..

said Sharur Chanana, chief investment strategist at Saxo Markets” (Saxo Markets): “While current leading companies like Nvidia have a strong foothold, it reminds us that dominance in the field of artificial intelligence is not guaranteed. The emergence of the Chinese deep sector model indicates that competition is becoming more intense, and although it may not pose a major threat now, future competitors will develop and challenge major companies faster. The announcement of technology company earnings results this week will constitute a decisive test“.