Global stock markets are showing mixed reactions because of the impact of DeepSeek, a Chinese AI startup. In the US, stock futures have fallen, meaning people are worried about the effect DeepSeek could have on big tech companies like Nvidia and Google. However, in some Asian markets, stocks are going up because people are excited about DeepSeek’s quick success. This situation is causing discussions about what might happen to major tech companies in the future.

US futures fall as concerns over DeepSeek grow

US stock futures dropped sharply on Monday. The S&P 500 futures fell by 1 percent, and Nasdaq 100 futures dropped nearly 1.9 percent during trading in Asia. This decline shows that investors are worried DeepSeek’s new AI model could change how big US tech companies like Nvidia, OpenAI, and Google do business.

The concern is that DeepSeek’s model uses cheaper, less powerful chips, while US companies like Nvidia use expensive, high-performance chips for their AI systems. DeepSeek's cheaper approach could make it more affordable, which might hurt the business of these US companies.

Asian markets respond differently

The reaction in Asian markets has been mixed. In Hong Kong, tech stocks have gone up, with the Hang Seng Tech Index rising by 2 percent. On the other hand, Japan’s market saw a drop. The Nikkei 225 futures fell by 0.6 percent, and shares of Advantest Corp., which supplies chips to Nvidia, dropped by 8.6 percent.

Also, SoftBank Group, which recently gained attention for investing in AI technology, saw its stock fall by 5.4 percent.

DeepSeek’s revolutionary AI model and its low cost

DeepSeek, started in 2023 by AI expert Liang Wenfeng, has created a revolutionary AI model that costs much less than other AI models. Forbes reports that it only cost $5.6 million to develop, which is very cheap compared to the high costs of other big AI companies, especially those in the US. DeepSeek uses open-source technology and lower-end chips that are not affected by US export rules, allowing them to avoid expensive hardware and still offer strong AI services.

The company is funded by Wenfeng's own hedge fund, High-Flyer. This means DeepSeek doesn’t have to worry about outside investors pressuring them. It allows the company to focus on long-term research and innovation without financial problems.

How DeepSeek challenges US tech giants

DeepSeek’s success raises important questions about the need for massive financial investment in AI. Experts believe the arrival of DeepSeek challenges the idea that huge capital spending is required to dominate the AI industry. “DeepSeek’s release is deeply problematic for the thesis that massive capital expenditure is necessary for AI dominance,” Nirgunan Tiruchelvam, head of consumer and internet at Aletheia Capital, stated in an interview with Bloomberg.

Charu Chanana, chief investment strategist at Saxo Markets, echoed this point, saying, “While Nvidia has a strong foothold, DeepSeek's emergence underscores that AI dominance cannot be taken for granted.”

Global market reactions

The success of DeepSeek has impacted markets around the world. Chinese AI-related stocks saw a rally, with the Shanghai Composite rising 0.2 percent and Hong Kong’s Hang Seng climbing 0.7 percent. In contrast, Japanese chipmakers, including Advantest and Disco Corp., saw significant losses, largely due to concerns about less demand for high-end chips used in AI systems.

While DeepSeek’s technology has sparked a shift in the market, challenges remain. DeepSeek faces significant competition, especially as it is still at a disadvantage in computing power due to US restrictions on advanced chips. Overcoming these challenges will be key for DeepSeek as it tries to expand and compete globally.

What lies ahead for US tech?

DeepSeek’s sudden rise puts additional pressure on US tech companies that are set to report their earnings soon. Analysts predict slower profit growth for big names like Apple and Microsoft, adding to concerns about high valuations in the AI market. According to Kyle Rodda, senior market analyst at Capital.com, the situation is only becoming more complex: “The proverbial arms race in AI investment has taken a very interesting turn. China’s advancements will undoubtedly catch the ire of the Trump administration, raising geopolitical risks for US firms.”