Tech shares tumble due to shock rise of Chinese AI chatbot DeepSeek

27 January 2025, 12:46 | Updated: 27 January 2025, 12:47

Tech stocks have plunged around the world after an AI start-up from China launched a new chatbot which threatens the world's leading competitors at a much lower cost.

DeepSeek’s new artificial intelligence chatbot has triggered market turmoil that could wipe more than $1.2 trillion (£960bn) off technology companies at the opening bell in New York later.

It has soared to the top of the Apple Store’s download charts as it stunned industry insiders with its ability to match its US competitors.

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Shares in AI-related firms based in the US such as Nvidia, Microsoft and Meta are all down on Monday morning ahead of the US markets opening.

The New York Stock Exchange and Nasdaq markets open at 2:30pm UK time.

Meanwhile in Europe, Siemens Energy - an AI winner on this continent - had dropped 21 per cent, as of noon CET on Monday. Tokyo-listed SoftBank, one of the named partners in Donald Trump’s Stargate AI project, was down more than eight per cent for the day.

Japanese tech conglomerate SoftBank was down more than 8pc overnight, less than a week after it was announced as a key investor in US President Donald Trump’s new $500bn (£401bn) venture to build infrastructure for artificial intelligence in the United States.

The reason for the heavy and immediate share price falls is that DeepSeek’s results appear to go against the idea followed by big tech that enormous spending and the processes followed so far are the way to generate the best results and returns from AI.

DeepSeek was developed by a start-up based in the eastern Chinese city of Hangzhou, known for its high density of tech firms.

Available as an app or on desktop, it can do many of the things that its Western competitors can do - write song lyrics, help work on a personal development plan, or even write a recipe for dinner based on what’s in the fridge.

The reason for the heavy and immediate share price falls is that DeepSeek’s results appear to go against the idea followed by big tech that enormous spending and the processes followed so far are the way to generate the best results and returns from AI.

“[It] is deeply problematic for the thesis that the significant capital expenditure and operating expenses that Silicon Valley has incurred is the most appropriate way to approach the AI trend," said Nirgunan Tiruchelvam, head of consumer and internet at Aletheia Capital.

“It calls into question the massive resources that have been dedicated to AI.”