Tech Markets Plummet Amid Fears of AI Loss of Primacy

A popular app from China sent the tech markets plummeting on Monday, fueled by fear that the United States may be losing its primacy in artificial intelligence.

Nvidia Shares and Tech Titans Take a Hit

Nvidia shares dropped 16.9%, contributing to a 1.5% slide in the S&P 500, while tech titans contributed to the Nasdaq Composite Index falling 3.1%, its worst decline in over a month.

DeepSeek’s AI Model Sparks Concerns

The setbacks are being attributed to an announcement by China-based DeepSeek that it has developed an AI model that can compete with the likes of ChatGPT, Claude, and Gemini at a fraction of the cost and the rise over the weekend of the company’s free app to the top of the charts in Apple’s App Store in the U.S.

Expert Analysis

“DeepSeek has gained popularity because it has shown simply how good it is at the tasks consumers care about,” said Hodan Omaar, a senior AI policy analyst at the Center for Data Innovation, a think tank studying the intersection of data, technology, and public policy, in Washington, D.C.

Rising Star in AI Development

Hodan called out DeepSeek as a rising star in a report she wrote in June. One of the key points of that report was that the gap between the leading models from U.S. industry leaders and those developed by China’s foremost tech giants and start-ups was quickly closing.

Open-Source AI: A New Era of Technological Advancement

“Open-source AI, with its transparency and collective development, often outpaces closed-source alternatives in terms of adaptability and trust,” he said. “As more organizations recognize these benefits, we could indeed see a significant shift towards open-source AI, driving a new era of technological advancement.”

Markets Overreacting to AI Innovation

Nevertheless, the markets may be selling the existing AI ecosystem short. “I think the markets are overreacting to the source of the innovation, as opposed to the innovation itself,” observed Chirag Dekate, vice president analyst at Gartner, a research and advisory company based in Stamford, Conn.

Jingoistic Perceptions and Misconceptions

“Because of that, it is amplifying jingoistic perceptions,” he told TechNewsWorld. “It is also amplifying perceptions that you don’t need data centers, [and] you don’t need GPUs when the underlying facts are completely the opposite,” he said. “In order to deliver AI at scale, in order to create AI-native societies of the future, you still need underlying infrastructure.”