The stock market was shaken last week due to Chinese AI DeepSeek chatbot that is claimed to have been built in just a few months and for just $6 million. The phenomenon suggests that powerful AI might not need the most expensive as well as high-powered hardware. It is a challenge to the belief held by U.S. tech companies that huge investments in computing power are essential for AI success.
The reaction was swift and there was a sell-off in semiconductor as well as computer networking stocks. AI chip leader was affected the most even though a slight recovery was witnessed later in the week. Nvidia had been riding high on the AI wave and became one of the biggest losers following the news of DeepSeek. Its shares dropped by 17% on Monday and it was the steepest decline for the company since the early days of the COVID-19 pandemic. The market cap of Nvidia even shrank by nearly $590 billion at one point. Investors started worrying that the efficient AI model of DeepSeek could push companies to rethink their strategy of spending big on expensive chips.
Meta Platforms emerged as one of the stock market winners as its shares rose 6.4% and became the top performer among the biggest tech companies. Meta mainly focuses on open-source AI with its large language model Llama. It witnessed a boost when the open-source model of DeepSeek proved successful.
Enterprise software company ServiceNow had a mixed week as its shares initially climbed by 4% on the back of optimism that cheaper AI models could drive up demand for AI-powered software. Lower computing costs could increase profit margins and open the door for more AI models across different sectors. However, its stock plunged 11% even though investors were concerned about slower-than-expected growth in subscription revenue.
The past week highlighted unpredictable nature of the stock market and especially when it comes to new breakthroughs in technology. The affordable AI model of DeepSeek challenged long-held beliefs. Companies like Meta benefited while others like Nvidia and ServiceNow faced setbacks.
