Tech stock selloff deepens as DeepSeek triggers AI rethink

DeepSeek’s release of the R1 reasoning model has dragged Nvidia shares and tech shares globally wiping $593 billion from the AI chipmaker’s valuation.

Japanese technology shares fell on Tuesday as a global market rout sparked by the emergence of a low-cost Chinese artificial intelligence model entered day two, with investors questioning the sky-high valuation and dominance of AI bellwethers.

Shares of Nvidia, the poster child of the AI boom in recent years, dragged U.S. stocks lower, sinking 17% on Monday and wiping $593 billion from the chipmaker's market value, a record one-day loss for any company.

It all stemmed from a free AI assistant launched by Chinese startup DeepSeek last week that the firm said uses less data at a fraction of the cost of services available currently, garnering significant attention worldwide including from OpenAI CEO Sam Altman who called it an "impressive model".

"We will obviously deliver much better models and also it's legit invigorating to have a new competitor!," Altman, the head of the AI firm behind ChatGPT, said in a social media post.

The launch and increasing popularity of DeepSeek spurred investors to dump tech stocks globally, with ripples felt from Tokyo to Amsterdam to Silicon Valley.

In Japan, chip-testing equipment maker Advantest, a supplier to Nvidia, lost 10% on Tuesday after diving nearly 9% on Monday. Chip-making equipment maker Tokyo Electron fell 5.3%, while technology start-up investor SoftBank Group was 6% lower.

Over in the U.S., Broadcom finished down 17.4%, followed by ChatGPT backer Microsoft which fell 2.1% and then Google parent Alphabet which ended down 4.2%.