Shares of semiconductor equipment giant Applied Materials Inc. plummeted 7.52% in pre-market trading on Monday, leading a broader selloff in AI and tech stocks. The sharp decline was fueled by growing concerns over the potential impact of a low-cost AI model released by Chinese startup DeepSeek on the future demand for high-end chips and computing hardware.
DeepSeek recently launched an open-source AI assistant that it claims can match the performance of leading models like OpenAI's ChatGPT, but at a fraction of the computing cost. The startup said it trained its latest AI model for just $5.6 million over two months, using less powerful chips, raising questions about the necessity of massive investments in expensive AI hardware by U.S. tech giants.
The progress made by DeepSeek has sparked fears that if its approach of producing competitive AI with cheaper hardware proves viable, it could significantly dampen the demand for high-end AI chips and infrastructure supplied by companies like Applied Materials to firms such as Nvidia. This prospect led to a widespread selloff in semiconductor and AI stocks in pre-market trading, with Nvidia, AMD, Broadcom, and Micron all seeing sharp declines.
