How DeepSeek caused the largest tech sell-off in history

It began with a quiet unveiling in late December, then erupted into a global market shake-up on last Monday. DeepSeek, a Chinese artificial intelligence startup, introduced an open-source model that not only costs far less to train but also outperforms several major U.S. offerings. Investors wasted no time reacting.

Tech shares in the U.S. and Europe tumbled, dragging down valuations from Silicon Valley to Amsterdam. Some wondered if this might be the moment that topples American dominance in AI innovation.

Nvidia faced the fiercest hit. Its stock plummeted 17%, erasing around $600 billion (€573 billion) in market value—a historic intraday loss. ASML, Europe’s leading AI chip equipment provider, dropped 7% as investors reeled from news that DeepSeek had used cheaper Nvidia H800 chips yet achieved high-end results. Meanwhile, the Nasdaq Composite shed over 3%, with tech as a sector down 5.6% overall. Across the Atlantic, European markets followed suit, weighed down by losses in software and chipmaking giants.

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But that was just the start. Over in semiconductors, Broadcom’s shares slid 17.4%, Marvell tumbled 19.1%, and AMD was off by 6.3%. Intel, typically a bellwether, slipped 2.5%. Cloud and software names felt the chill too: Oracle sank 13.8%, while Cisco declined 5%. Even Microsoft and Alphabet, both heavily invested in AI, fell by 2.1% and 4.2% respectively. Tesla’s AI-driven ambitions took a modest hit—its shares dipped 2.3%. Apple and Amazon, less reliant on AI-centric revenues, saw only marginal moves and, in fact, edged up 0.03% and 0.002%.

Other tech names showed mixed resilience. Meta Platforms rose by 1.9%, buoyed by internal confidence in open-source AI. Texas Instruments added 0.9%, suggesting some segments see DeepSeek’s efficiency as a fresh opportunity rather than a threat. Salesforce jumped 4%, possibly hinting that lower-cost AI could boost business adoption of customer relationship tools. SAP slipped 0.3%, while IBM’s drop was a mild 0.3%. Qualcomm registered a modest 0.5% decline, reflecting questions about demand for specialized AI chipsets as cheaper options emerge.

Global currency markets also took notice. The U.S. dollar weakened against several G-10 peers as bond yields declined, then rebounded in Tuesday’s Asian session. Gold and oil prices dipped too, as some investors liquidated positions to assess whether DeepSeek’s breakthrough was a short-lived frenzy or a genuine game-changer.

Kyle Rodd, senior market analyst at Compital.com, summed up the mood: “As far as the markets are concerned, I think there is a shoot first and ask questions later quality to the sell-off.” He added that, with so many competing claims about DeepSeek’s computing feats, “there’s a lot of information to parse and discount.” Meanwhile, U.S. President Donald Trump called DeepSeek’s rise “a wake-up call” for American tech firms. Although he expressed confidence in the long-term strength of U.S. companies, his renewed presence has reignited talk of a possible new round of U.S.–China trade tensions. So far, the steep 60% tariff on Chinese imports he promised during the campaign remains on hold, pending a formal review.

DeepSeek’s model, built for under $6 million (€5.7 million) in roughly two months, challenges the idea that advanced chips and deep pockets are the only route to AI success. By outperforming high-profile systems such as GPT-4o and Google’s Gemini 2.0 Flash on certain complex tasks, the Chinese startup has forced a hard look at what truly drives AI innovation—and how global markets might react to a new contender in the race.

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What comes next for tech giants and investors alike? Some believe DeepSeek’s efficiency could prompt a wave of lean AI research, cutting costs and opening doors for smaller players. Others expect American behemoths to strike back fast, investing more aggressively in next-generation hardware and software. For now, the shock waves continue, leaving analysts and everyday observers guessing whether Monday’s sell-off was a one-off jolt or a sign of permanent change…

Featured image credit: Kerem Gülen/Midjourney