Photo: GREG BAKER / AFP / Getty Images
Tech stocks in the United States fell sharply on Monday (January 27) after Chinese AI company DeepSeek revealed a new AI model, R1, that operates at a fraction of the cost of existing American models. The S&P 500 fell 1.4%, while the tech-heavy Nasdaq dropped 2.3%. Nvidia, a leading supplier of AI chips, saw its stock fall 12%, and other tech giants like Meta and Alphabet experienced significant losses.
DeepSeek, a one-year-old startup, claimed to have developed its AI model with just $5.6 million, challenging the high-cost models of American companies like OpenAI and Google. This announcement has raised concerns about the U.S.'s dominance in AI technology. CNN reported that Marc Andreessen, a prominent tech investor, called DeepSeek's achievement "one of the most amazing and impressive breakthroughs I've ever seen."
The impact of DeepSeek's announcement extended beyond tech stocks. Energy companies, which had been benefiting from the high electricity demands of AI data centers, also saw declines. Constellation Energy fell nearly 20%, and Vistra dropped 26%.
Later in the day, DeepSeek announced it had suspended new registrations due to a cyberattack. Existing users could still log in.