DeepSeek set to wipe out over US$ 1 trillion from tech stock valuations

• Nvidia flirts with bear market; nearly 20% drop from record high

• China AI startup, DeepSeek, challenges US AI dominance

• DeepSeek to dominate Apple, Microsoft, Tesla, Meta earnings this week

• Stocks selloff adds to market concerns, including  Fed, Trump watch

DeepSeek – China’s rival to ChatGPT – is stoking fear across global financial markets.

• Nvidia is down 11%, flirting with a bear market (falling almost 20% from its current record high)

• FXTM’s NAS100 fell as much as 5% pre-market

• European equities EU50 and NETH225 tumbled as ASML fell as much as 12%.

• Even Bitcoin tumbled as low as $97720, mirroring the selloff in Western AI stocks.

What is going on?

The answer is DeepSeek – a Chinese artificial intelligence startup that is China’s answer to ChatGPT.

The bigger picture…

Chinese AI company DeepSeek has gatecrashed the AI party by releasing a new product.

But here is the thing, it is just a fraction of the production cost seen in the United States.

This has raised questions about whether the hundreds of billions of dollars invested were required to stay ahead of the AI race.

A deeper dive…

This development could not have come at a worse time for big tech companies scheduled to publish their latest earnings this week.

4 of the 7 magnificent tech stocks namely Tesla, Meta, Microsoft and Apple will be under the spotlight.

DeepSeek has shown the world that it could develop complex AI models that do not cost hundreds of billions of dollars.

So, this may place extra scrutiny on big tech earnings this week as investors focus all their attention on how much was invested in AI last quarter.

• If the existing AI leaders can convince investors that they’ll be able to fend off DeepSeek, this could trigger a rebound in AI stocks/US stock indices.

• However, if AI leaders are unable to soothe market fears about DeepSeek’s threat, this could spell more pain for AI stocks.

What next?

Any more positive developments around DeepSeek could fuel fears about US exceptionalism being eroded.

This may translate to more pain in the US tech space as jittery investors book profits.