Economy alert: Global stock market loses $1trillion as tech giants 'spooked' by China 'AI challenger'
Ben Habib says the UK needs a 'complete reassessment' of the way …
GB NEWS
Wall Street is in turmoil with US tech giants bracing for significant losses as the stock market plummeted this morning, following the unexpected emergence of a Chinese rival in the AI chatbot, which has topped iPhone app charts in the UK and USA.
Before the markets opened, futures trading indicated major falls for technology and artificial intelligence stocks ahead of the American stock market's opening earlier today, with investors dumping around $1trillion of technology stocks in premarket trading sending the S&P 500 2.3 percent lower before the bell.
Once US markets opened, the Nasdaq slipped 3.5 per cent upon the ring of the bell, with Nvidia and Super Micro Computer dropping more than 10 per cent. Furthermore, the S&P 500 was done two one and the Dow fell 0.4 per cent.
.Leading AI-related companies including Nvidia, Microsoft and Meta were already showed declines ahead of Monday's market opening. The market turbulence comes as Chinese AI chatbot DeepSeek has rocketed to the top of Apple's App Store charts across the UK, US and China.
Asian markets have already felt the impact, with AI investor SoftBank falling eight per cent and Tokyo Electron dropping 4.9 per cent, while European tech giant ASML has seen a nine per cent crash.
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Wall Street has taken a shocking hit as shares in the Nasdaq plummeted this morning
The tech-heavy Nasdaq index was expected to fall three per cent when US markets open. DeepSeek's sudden rise has triggered a major rethink of the global AI sector's landscape.
Until now, the United States, home to OpenAI's ChatGPT and Google's Gemini, has been viewed as the undisputed leader in AI technology.
The Chinese chatbot's emergence, however, has challenged this dominance, with claims it can match ChatGPT's performance despite being developed at a fraction of the cost.
"There is a new AI challenger in town and investors are spooked at what they've discovered," says Russ Mould, AJ Bell investment director.
The 'Magnificent 7 stocks' —Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla— are the primary drivers of the Nasdaq's value
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"China's DeepSeek last week revealed how to build a large language model on a budget that can learn and improve without human supervision," Mould adds. The app is free to use and operates on lower-cost chips with less data than its Western counterparts.
This development comes amid ongoing US restrictions on China's access to advanced American-made chips since 2021. These restrictions have led Chinese AI firms to adapt by sharing their work more openly and seeking alternative methods to boost performance, analysts claim.
The result has been the creation of AI models requiring significantly less computing power to operate. "The companies that enjoyed first-mover advantage will now be under pressure to launch something even better or be left behind," notes Mould.
"It's natural evolution when someone launches a product or service that sees strong demand, someone else will always try to come along with something cheaper to undercut the market leaders," he adds.
The timing is particularly significant as Silicon Valley prepares for a crucial week of earnings reports.Meta and Microsoft are set to release their financial results on Wednesday, followed by Apple on Thursday.
This market reaction reflects growing concerns about disruption to what has previously been "an easy ride for most stocks linked to the AI theme," according to Mould.
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The Nasdaq took a hit this morning as investors reacted to the launch of Deepseek's AI language model
PAThe development marks a potential shift in the global AI landscape, with Chinese firms making significant technological strides. "The US government both under Donald Trump and previously under Joe Biden have been trying to stop China from accessing Western technology," Mould explains.
"That strategy might have backfired as it looks to have encouraged China to ramp up efforts to build its own technology and we're now seeing evidence that the country is making waves." Investors are now reassessing their portfolios, leading to pullbacks in major tech stocks across global markets.
Susannah Streeter, the head of money and markets at Hargreaves Lansdown, highlighted this market reaction coincides with an important week for the tech industry.
She explained: "There’s a lot riding on this week’s earnings reports for big tech, with updates due from Meta, Microsoft, Apple and Tesla. There’s a lot of upside already sewn into expectations, which leaves plenty of room for disappointment."
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