Nasdaq Sinks 2.5%, Losing 500 Points as DeepSeek AI Rattles Tech Stocks

The Nasdaq Composite witnessed a 2.6% decline of more than 500 points on Monday as concerns about disruptive AI technology developed by Chinese startup DeepSeek spread throughout the technology stock sector, causing widespread selling. Laboratory stocks experienced declining values as the Dow Jones Industrial Average lost 100 points and slipped 0.2% in Monday's trading. The S&P 500 saw a larger drop at 1.6%.

The December launch of DeepSeek's new large language model (LLM) has sparked widespread industry alarms due to its energy-efficient, low-cost structure. The $6 million two-month development initiative behind the model utilizes Nvidia ( NVDA , Financial ) lower-capability chips that seem positioned to challenge the leader's dominance of the premium GPU market. Last week, the new model from DeepSeek appeared alongside direct competition for OpenAI's ChatGPT and Meta's ( META , Financial ) Llama 3.1 as it reached the top spot of Apple's (AAPL, Financial) App Store charts during the weekend.

DeepSeek's AI disruptions have generated investor apprehension because they question U.S. AI market superiority and indicate upcoming transitions toward less expensive technological solutions. Highly-Al-modulated Nasdaq shows growing sensitivity to AI-related movements, which intensifies competitive pressures on rapidly appreciating tech stocks.

The market situation has evolved into a watchful condition, with analysts recognizing potential transformations in Nvidia and other semiconductor industries' premium AI chip market needs. This recent market decline highlights how investors respond to new disruptive elements that are reshaping the continually developing AI framework.

This article first appeared on GuruFocus .