Wall Street shares are plunging at the fastest pace in five months as China shows that it can develop artificial intelligence (AI) technology at a fraction of the cost of trillion-dollar US giants like Nvidia, Microsoft and Apple.
The Nasdaq tech index plunged 3.6% within seconds of opening today as AI-focused shares in the US and Europe face a $1trillion wipe out.
And it’s all down to the release of bargain-priced Chinese AI chatbot DeepSeek, which has stunned US tech experts by developing a competitor to Microsoft’s hugely popular ChatGPT.
While Microsoft has ploughed a staggering $14billion (£11billion) into ChatGPT, DeepSeek cost a meagre $5.6million (£4.5million) but users say it’s just as good.
And it’s open to anybody to use, free of charge.
This is a bullet aimed at the heart of AI hype, which has driven US tech valuations to unprecedented highs.
If China can do the same job for small change, the investment case for AI collapses.
This would be a huge blow for Trump, who plans a $500billion investment in AI and has pinned the success of his administration on US tech dominance.
DeepSeek is proving stunningly popular, with the app soaring to the top of the Apple Store’s download charts.
It shows how quickly China has closed the gap in AI, threatening the virtual monopoly the US has enjoyed in the ground-breaking tech.
This will also hit UK pension funds and Stocks and Shares Isas, as Brits have poured money into the US stock market and tech in particular.
China has already enjoyed massive success with its TikTok app. If DeepSeek repeats its success, it could threaten profits and jobs across Silicon Valley.
It’s also a huge threat to Trump’s “America First” agenda, which seeks to bolster US tech supremacy by hitting Chinese tech firms like Huawei and TikTok with sanctions and tariffs.
The aim was to cut off Chinese access to critical technologies and markets. But if China can make its own versions at a fraction of the cost, Trump’s plan could fail.
DeepSeek has delivered a stinging blow to the narrative of American invincibility.
Trump could suffer a further blow if other nations pivot towards dirt-cheap Chinese AI.
It could even spark a new tech cold war, where countries are forced to choose between competing AI ecosystems.
Venture capitalist Marc Andreessen, a close Trump advisor, described DeepSeek as “AI’s Sputnik moment”, a reference to the Soviet satellite launch that told the US it was losing the Cold War space race.
The stakes couldn’t be higher. DeepSeek has been described as a “wake-up call to America”.
Trump may just have suffered the biggest blow to his presidency. As yet, it’s impossible to say.
But Americans suddenly have a trillion reasons to be worried.
