Nvidia Corp. and ASML Holding NV found themselves under significant pressure early Monday as shares tumbled following the rise of Chinese artificial intelligence startup DeepSeek, which is being viewed as a formidable competitor to established powers like OpenAI and Meta Platforms Inc.
After the release of DeepSeek's latest AI model last week, which reportedly delivers comparable performance to Western chatbots but at a fraction of the cost, investors reacted negatively. Nvidia's shares plummeted by around 9 percent during premarket trading, marking the chipmaker's steepest decline amid growing fears over its market dominance. ASML experienced even larger losses, seeing its stock drop as much as 11 percent to €626.20 during Amsterdam trading hours, reflecting its biggest intraday loss since mid-October.
Throughout the technology-heavy Nasdaq 100 futures index, the impact was felt broadly as it also slid by 3 percent. This downturn has prompted analysts and investors to rethink the future of these tech giants, especially as DeepSeek’s advancements raise questions about the sustainability of high-end chip reliance.
“Concerns have immediately emerged,” Jefferies analysts wrote to clients, “that DeepSeek could disrupt the current AI business model which depends heavily on expensive chips and extensive computing resources.” The company, founded by quant fund chief Liang Wenfeng, has quickly climbed the ranks, becoming the top app on Apple Inc.'s App Store.
Both Nvidia and ASML previously thrived due to the surging investments in AI technologies. Last Friday, Meta announced plans to ramp up its capital expenditures on AI projects by about 50 percent this year, potentially reaching upwards of $65 billion. This new funding aligns with recent announcements from OpenAI, SoftBank Group Corp., and Oracle Corp., who came together for the Stargate initiative, designing to invest $100 billion toward developing data centers and AI infrastructure across the United States.
Amid these developments, geopolitical elements play a significant role as well. The U.S. has taken measures to limit the export of advanced semiconductor technologies to China, as tensions grow over the Asian nation’s progress. This includes restrictions imposed on sales of advanced Nvidia AI chips, targeting countries including some U.S. allies. Notably, ASML has historically faced barriers when attempting to sell its top-tier extreme ultraviolet lithography machines to China, constrained by U.S.-led export limitations.
Regulatory pressure has escalated, most recently as the Dutch government joined U.S. efforts, restricting the sale of immersion deep ultraviolet lithography systems to China. These coordinated efforts highlight the growing unease over China’s capabilities in AI development and manufacturing.
Despite these restrictions, DeepSeek's emergence indicates potential ingenuity among Chinese engineers, who appear to be optimizing their techniques to work efficiently within the bounds of limited resources, creating efficient alternatives. The innovation posed by DeepSeek brings forth serious concerns for both Nvidia and ASML, as they now confront not only increased competition but also the fast-evolving challenge of meeting investor expectations.
Market watchers will be keeping a close eye on how these dynamics play out, particularly considering the significance of investments from major corporations like Meta and the strategic responses from the U.S. and its allies aimed at containing China's technological advances.
Investors may need to brace themselves as the tech sector reacts to this shifting competitive environment, which could redefine the operational landscapes for key players like Nvidia and ASML. Reactions from the market today, including the timing and extent of these declines, will undoubtedly resonate as companies explore paths to adapt to this newly competitive forefront.