Shares of artificial intelligence company C3.ai tumbled 5.52% in intraday trading on Monday, underperforming the broader market. The stock's plunge came amid growing concerns over a Chinese AI startup's recent achievements in developing large language models (LLMs) at a fraction of the cost incurred by U.S. tech giants.
The startup, DeepSeek, has roiled AI-driven stocks after reports emerged about its ability to build highly capable LLMs using relatively cheap compute resources. DeepSeek's success has raised questions over the massive capital spending increases planned by companies like Alphabet, Microsoft, and Meta to dominate the AI market with their expensive AI services.
Analysts warn that if cheaper alternatives like DeepSeek's models gain traction, it could weigh on the earnings and profit margins of U.S. tech firms investing billions into expensive AI hardware and infrastructure. There are also concerns that demand for AI chips from companies like Nvidia could be impacted if DeepSeek's approach reduces the need for expensive compute power to develop AI systems.
