FACTBOX - US tech firms 'in deep water' as Chinese ventures take initiative

By Mucahithan Avcioglu

ISTANBUL (AA) — Chinese companies are wreaking havoc on US tech firms' stock prices as their products surpass American ones in sales, downloads, and cost-effective solutions.

Chinese artificial intelligence (AI) chatbot DeepSeek has overtaken OpenAI’s ChatGPT in downloads and was the most downloaded free app on the App Store on Monday, triggering significant drops in US stock markets.

US tech stocks had previously experienced a week-long surge following President Donald Trump’s inauguration on Jan. 20. Shares of major tech firms skyrocketed between Jan. 17 and Jan. 24, with Nvidia rising 3.54%, SoftBank 16.2%, Oracle 14%, ARM 8.88%, and MGX 13.79%. Meta gained 5.66%, Amazon 3.94%, Google 2.2%, Monolithic Power Systems 8.4%, Vertiv 7.68%, Broadcom 3.05%, Cisco Systems 3.32%, and Dell Technologies 3.7%.

However, following DeepSeek’s rise, Nvidia plummeted nearly 17% on Monday, losing around $600 billion in market value — the biggest daily decline in US history. Other losses included ARM 10.24%, SoftBank 12.7%, Oracle 13.8%, MGX 6.79%, Tesla 8.24%, Microsoft 2.14%, Google 4.03%, Monolithic Power Systems 11.44%, Vertiv 29.88%, Broadcom 17.4%, Cisco Systems 5.03%, and Dell Technologies 8.7%.

Although US tech stocks regained some ground on Tuesday, the shock from DeepSeek continues to weigh on valuations.

- What is DeepSeek?

DeepSeek is a Chinese AI firm specializing in large language models (LLMs). Founded in 2023 by Liang Wenfeng, a co-founder of hedge fund High-Flyer, the company develops open-source AI models.

DeepSeek-R1, one of its flagship models, was reportedly trained at a fraction of the cost—$6 million compared to OpenAI’s $100 million GPT-4 in 2023 — while using only one-tenth of the processing power of a comparable LLM. Despite these resource differences, reports indicate DeepSeek-R1 delivers performance on par with OpenAI’s GPT-4o.

The company emerged against the backdrop of US tariff threats and AI-related restrictions, which aimed to curb China’s ability to develop advanced AI systems.

DeepSeek has actively recruited young AI researchers from top Chinese universities and broadened its talent pool by hiring professionals beyond computer science. According to the company, its AI chatbot was entirely developed by Chinese software developers, unlike Silicon Valley’s AI models, which include foreign nationals working in the US on H-1B visas.

- Reactions to DeepSeek’s impact on US tech stocks

DeepSeek’s sudden rise and its ripple effect on US markets prompted widespread reactions, including from President Trump.

“The release of DeepSeek, AI from a Chinese company, should be a wake-up call for our industries that we need to be laser-focused on competing to win,” Trump told House Republicans Monday in Miami.

He also noted China’s AI advances:

“I’ve been reading about China and some of the companies in China, one in particular coming up with a faster method of AI and much less expensive method, and that’s good because you don’t have to spend as much money. I view that as a positive, as an asset.”

“I view that as a positive because you’ll be doing that too, so you won’t be spending as much, and you’ll get the same result, hopefully.”

The president stressed that the US has the world’s “greatest” scientists, something he said that Chinese leaders acknowledged. He suggested US firms should achieve better results while reducing costs.

Nvidia also responded to DeepSeek’s emergence, calling it “an excellent AI advancement” while stressing that the rising demand for AI models will require significant chip supplies.

DeepSeek’s work illustrates how new models can be created by “leveraging widely available models and compute that is fully export control compliant,” Nvidia said in a statement.

The company also highlighted that “inference” — the process of generating AI outputs — requires significant numbers of NVIDIA GPUs and high-performance networking.

- Battle for semiconductor supremacy

The US-China rivalry in semiconductors has intensified as Washington imposes restrictions on Beijing’s chip industry.

On Dec. 2, the US Commerce Department announced restrictions on the sale of two dozen types of semiconductor manufacturing equipment and barred several Chinese firms from using American technology.

In response, China’s Commerce Ministry denounced the move, accusing the US of “abusing” export regulations and threatening global supply chain stability. The next day, Beijing banned the export of key semiconductor materials to the US, escalating tensions.

Trump’s additional tariff threats against Chinese products have fueled further uncertainty. His protectionist economic policies, which marked his first term, appear set to continue — if not escalate — in his second term, which began on Jan. 20.

Many analysts view DeepSeek as a new front in the US-China semiconductor war, as AI models like DeepSeek and ChatGPT rely heavily on advanced chips.

- Electric vehicle race

The tech rivalry extends beyond AI and semiconductors to electric vehicles (EVs).

In early January, Chinese EV maker BYD overtook Tesla in global EV sales, leading to a 6.78% decline in Tesla’s stock over a month.

Other US EV makers also suffered losses, including Lucid Motors fell 12.7%, Rivian 5.38%, Canoo Inc. 70.12%, Nikola Corp. 20.43%, Hyzon Motors 39.07%, Hyliion 13.38% in the same period.

Some analysts suggest Tesla’s stock drop is not only due to BYD’s market dominance but also influenced by CEO Elon Musk’s ties to Trump’s administration and his far-right political statements following the new president’s election victory.

- Smartphone front

US smartphone makers are also losing ground to Chinese brands, even as global sales rebounded last year.

According to market research firm IDC, US-based Apple and South Korea’s Samsung saw declines in global smartphone sales in 2024, while Chinese brands like Xiaomi, Transsion, and Vivo expanded their market share.

The US-based Apple and South Korean Samsung saw drops in 2024 in global smartphone sales, while Chinese companies including Xiaomi, Transsion and Vivo increased their sales, according to a report released by market research company International Data Corporation (IDC).

Although Apple and Samsung remain the world’s top two smartphone brands, their market shares have shrunk, while Chinese firms have gained ground.

Since IDC released its latest report, Apple’s stock has declined 5.53% in a month, while Samsung’s remained flat.

Meanwhile, Chinese brands saw stock gains: Xiaomi rose 11.18% and Transsion climbed 5.05%