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The reveal of a new artificial intelligence assistant by a Chinese company looks poised to wipe almost a trillion pounds in value off some of the world’s most expensive technology companies.
DeepSeek is an AI assistant which appears to have fared very well in tests against some more established AI models developed in the US, causing alarm in some areas over not just how advanced it is, but how quickly and cost effectively it was produced.
Nasdaq 100 futures, which are essentially trades taking place before the market officially opens and thus affecting the opening price of companies within it, dropped more than four per cent on Monday morning, reported Yahoo Finance.
Individual companies from within the American stock markets have been even harder-hit by sell-offs in pre-market trading, with Microsoft down more than six per cent, Amazon more than five per cent lower and Nvidia down more than 12 per cent.
Bloomberg report that the combined losses in share price between the Nasdaq 100 and Europe’s Stoxx 600 technology sub-index would be equal to a market capitalisation wipeout of $1.2tn (£960bn), if there is not a recoup of those numbers before opening hours.
The New York Stock Exchange and Nasdaq markets open at 2:30pm UK time.
Google’s parent company Alphabet is facing a four per cent drop when the market opens, with Meta and Tesla slightly above that (4.4 per cent). Microsoft have a stake in Chat GPT owner OpenAI which they paid $10bn for, while Google’s AI tool is Gemini.
Meanwhile in Europe, Siemens Energy – an AI winner on this continent – had dropped 21 per cent, as of noon CET on Monday. Tokyo-listed SoftBank, one of the named partners in Donald Trump’s Stargate AI project, was down more than eight per cent for the day.
The reason for the heavy and immediate share price falls is that DeepSeek’s results appear to go against the idea followed by big tech that enormous spending and the processes followed so far are the way to generate the best results and returns from AI.
“[It] is deeply problematic for the thesis that the significant capital expenditure and operating expenses that Silicon Valley has incurred is the most appropriate way to approach the AI trend,’ said Nirgunan Tiruchelvam, head of consumer and internet at Aletheia Capital. “It calls into question the massive resources that have been dedicated to AI.”
