Nvidia shares plummeted 13.6% in premarket trading early Monday, as concerns over global AI competitiveness intensified following a disruptive announcement from Chinese startup DeepSeek. The development has sparked widespread sell-offs in the technology sector, raising questions about America’s position as a leader in artificial intelligence. The ripple effects of DeepSeek’s latest innovation extended beyond Nvidia, affecting European chipmakers ASML and ASM International, which fell 10.32% and 14.32% respectively during European trading hours. In Asian markets, Japanese semiconductor stocks also faced broad declines. DeepSeek’s Impactful Launch DeepSeek recently introduced a free, open-source large-language model, reportedly developed in just two months at a cost of less than $6 million—a fraction of what Western companies typically spend. The Chinese firm followed up with a reasoning model that has allegedly outperformed OpenAI’s latest offerings in numerous third-party evaluations. This has raised questions about the efficiency of AI investment strategies among major tech companies. “DeepSeek clearly doesn’t have access to the same compute resources as U.S. hyperscalers but has managed to produce highly competitive models,” said Srini Pajjuri, a semiconductor analyst at Raymond James, in a note to investors. U.S. Tech Giants on Alert Pajjuri noted that while this development could “drive urgency” among U.S. tech giants like Amazon and Microsoft to capitalize on their GPU resources, it also highlights the cost-effectiveness of alternative approaches. GPUs, central to training large AI models, remain an area where Nvidia dominates. Citi analysts remarked that DeepSeek’s innovation has “prompted investor inquiries around compute costs.” They emphasized that although DeepSeek’s advancements pose a challenge, U.S. tech firms’ access to advanced chips provides them with a significant advantage. “We don’t foresee leading AI companies moving away from cutting-edge GPUs anytime soon,” they added. Mixed Reactions From Experts Bernstein analysts expressed skepticism about DeepSeek’s cost claims, arguing that $6 million likely excludes expenses from earlier research and development efforts. “Their models are impressive, but they’re not miracles,” the analysts stated, dismissing fears of an AI infrastructure collapse as “overblown.” Adding to the conversation, the announcement of President Donald Trump’s $500 billion Stargate AI initiative underscored the U.S.’s commitment to maintaining leadership in advanced chip technologies. Broader Implications DeepSeek’s rapid advancements have ignited debates over the sustainability and competitiveness of AI investments. While some see this as a wake-up call for the U.S. to double down on its technological advantages, others caution against overreacting to the Chinese startup’s breakthroughs. As global tech markets grapple with these shifts, the sell-off underscores growing investor anxiety about the evolving AI landscape and its broader implications for the industry’s future.