US Faces Tough Competition From China In ‘AI Race’: Largest American Chip Maker Nvidia’s

Nvidia, a prominent American chip manufacturer, spearheaded a significant decline in tech stocks on Monday (27 January), following the introduction of an economical Chinese generative AI model, NDTV reported.

DeepSeek, a startup from the eastern Chinese city of Hangzhou, has developed a chatbot that reportedly exhibits the ability to compete with leading US AI firms, while only requiring a fraction of the investment that American companies have made.

This development could potentially challenge the prevailing US supremacy in the rapidly expanding industry. The Nasdaq index, known for its technological wealth, concluded with a decline of over three per cent.

Nvidia, a company whose semiconductors are a driving force in the AI industry, experienced a nearly 17 per cent drop in share value on Wall Street, resulting in a loss of close to $600 billion in market value.

DeepSeek, the company behind the highest-rated free app on Apple’s US App Store, revealed that it only invested $5.6 million in the development of its chatbot model. This amount is relatively insignificant compared to the billions that American tech behemoths have funneled into AI.

China is posing a challenge to the dominance of the US in the tech industry, stated Kathleen Brooks, who is the research director at the trading platform XTB.

“The focus is now on whether China can do it better, quicker and more cost effectively than the US, and if they could win the AI race,” she was quoted as saying by NDTV.

B Riley Wealth’s chief market strategist, Art Hogan, characterised the market’s reaction on Monday as a “shoot first, ask questions later” approach.

He pointed out that there is some skepticism regarding the claims made by the Chinese firm. “Everyone is trying to figure out ‘Can it be believed?’ and ‘What does it mean,'” Hogan said.

On Monday, the startup DeepSeek, which has been disrupting markets, announced that it was restricting the enrollment of new users due to significant malicious cyberattacks on its services.

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