The launch of R1 - a Chinese mobile app built on AI models from the company Deepseek - raises questions about how long the US dominance in AI will last.
Deepseek shows that it is possible to develop powerful AI models at a lower cost, says Vey-Sern Ling, CEO of the Geneva-based bank Union Bancaire Privée, according to Bloomberg.
Nvidia plummets by 10 percent
He warns that this could develop into a hard blow to investments in the US-dominated value chain around AI, with chip manufacturer Nvidia at the forefront.
Current industry leaders like Nvidia have a strong position. But this is a reminder that AI dominance cannot be taken for granted, says Charu Chanana, investment strategist at Saxo Markets, according to Bloomberg.
In futures trading, the tech-heavy Nasdaq exchange falls by over 3 percent ahead of Monday's opening. And it's also pointing downwards for the broader S&P 500 index - where tech giants like Apple, Nvidia, Amazon, and Microsoft weigh heavily. Nvidia's stock plummets by around 10 percent.
In Amsterdam, ASML, among others, takes a hit, with a price drop of 11 percent. On the Stockholm Stock Exchange, AI-exposed stocks like Munters fall by 13 percent, and Atlas Copco and ABB by around 4 percent.
With less advanced chips
The company Deepseek was founded just over a year ago by the Chinese hedge fund profile Liang Wenfeng. The company has developed an AI model with less advanced chips and at significantly lower costs, which is considered to be essentially equivalent to what US competitors Open AI and Meta Platforms have developed.
The Deepseek app R1 - which has received significant attention since the weekend - has quickly climbed to the top in terms of ranking among apps downloaded by Apple product users, such as iPhone, since its launch earlier in January.
The AI model that Deepseek is now offering has a clear Chinese profile, where sensitive political issues about Taiwan or what happened on Tiananmen Square in Beijing in 1989 are not answered. It is also not possible to get in-depth answers about who China's leader Xi Jinping is, while information about foreign top politicians is comprehensive.
Deepseek's AI breakthrough comes just days before a range of tech giants on Wall Street - such as Meta, Microsoft, and Apple - present quarterly reports.
