For the past year or so, the Nasdaq has become more tech stock-heavy. Much of this shift is due to the promise of advancements in artificial intelligence (AI). That overinflation came to a head on January 27th, when the Nasdaq dropped more than 3% by mid-afternoon trading. This dip is due to tech stocks taking a hit after Chinese company DeepSeek rolled out a new self-titled AI product.
While the launch was last week, DeepSeek is already gaining serious traction in the market. The company’s technology is comparable to most giant US manufacturers but with cheaper and more powerful chips.
DeepSeek is said to rival ChatGPT and already spent the weekend at number one on Apple’s App Store. The company claims its model was trained on a $5.6 million investment. Some experts doubt this since their American counterparts spend billions.
This also comes after President Donald Trump announced Stargate, a private-sector initiative of OpenAI by Oracle and SoftBank to build an AI infrastructure in the US. As of last week, the project is expected to cost $500 billion.
The Market’s AI Slump
Chip makers Broadcom is down 17%, Nvidia by 16%, and Advanced Micro Devices by 6%. Microsoft, who is behind OpenAI is down 4%, Alphabet by 3%, and Amazon by 1%. Compare this to Apple, which hasn’t sunk nearly as much as its competitors into AI, being up 3%.
However, Meta didn’t take a hit despite backing the Llama AI model.
The Nasdaq wasn’t the only market affected either. The S&P 500 fell 1.7% and the Dow Jones Industrial Average dropped 120 points. Hopefully, these markets will correct themselves naturally, but if this is any indicator, AI may not be the wave of the future many American firms hoped it would be.
We’ll keep you posted on updates about this situation as it develops.
