Chip Wars: DeepSeek's AI Disruption Shakes Tech Stocks

The article highlights the impact of DeepSeek's AI innovation on tech stocks. While European chip stocks rallied, U.S. stocks, including Nvidia, struggled. The emergence of DeepSeek's AI tool challenged ongoing industry beliefs, causing significant market shifts and investor uncertainty.

Semiconductor stocks experienced a multifaceted day on Wednesday, as European chip stocks surged due to strong earnings, while U.S. stocks such as Nvidia fell. Investors are gauging the potential threat posed by China's cost-effective DeepSeek AI tool. The Philadelphia semiconductor index had a slight decline of 0.4%, with the broader S&P 500 tech index dropping 1.9% primarily because of a more than 6% decrease in AI chip leader Nvidia.

After facing a record one-day market value loss on Monday, Nvidia saw an 8.9% rise on Tuesday. However, the launch of DeepSeek's free AI assistant last week, surpassing OpenAI's ChatGPT downloads on Apple's App Store, posed a challenge to incumbents in the AI field. Investors are currently assessing the implications of DeepSeek's emergence and its effect on high-priced tech stocks like Nvidia.

On the European front, technology stocks experienced a boost, partly due to a 5.6% gain in ASML following an unexpected rise in new bookings. However, U.S. chip stocks had varied performances; for instance, Cirrus Logic and ARM Holdings saw declines, while Coherent Corp and Advanced Micro Devices recorded gains. Analysts suggest watching ongoing fiscal results from companies like Microsoft and Meta for insights on AI spending plans.

(With inputs from agencies.)