Nvidia shares saw a major selloff in premarket trading Monday, leading a broad tech sector decline after Chinese startup DeepSeek's AI breakthrough raised concerns about industry competitiveness, CNBC reported.
The chip designer's share price plummeted 13.60% in premarket trading at 5:52 a.m. ET Monday, leading a broad tech sector decline after Chinese startup DeepSeek's AI breakthrough raised concerns about industry competitiveness, CNBC reported.
The market reaction followed DeepSeek's December release of an open-source large-language model, which the company developed in two months for under $6 million – significantly less than Western competitors' investments, according to CNBC.
"DeepSeek clearly doesn't have access to as much compute as US hyperscalers and somehow managed to develop a model that appears highly competitive," Srini Pajjuri, semiconductor analyst at Raymond James, said in a note Monday, according to CNBC.
Pajjuri noted one positive aspect – DeepSeek could "drive even more urgency among US hyperscalers" like Amazon and Microsoft to leverage their GPU advantages, CNBC reported.
Citi analysts addressed investor concerns about computing costs, noting that while US companies' AI model dominance "could be potentially challenged," their access to advanced chips remains advantageous. "Thus, we don't expect leading AI companies would move away from more advanced GPUs," the analysts said, according to CNBC.
The analysts referenced President Donald Trump's $500 billion Stargate AI project as "a nod to the need for advanced chips," CNBC reported.
Bernstein analysts expressed skepticism about DeepSeek's reported development costs, suggesting the figure "does not include all the other costs associated with prior research and experiments on architectures, algorithms, or data." They characterized concerns about the "death-knell of the AI infrastructure complex as we know it" as "overblown," while acknowledging the models' impressive capabilities.
