U.S. In Grip of Tech Bloodbath As Stock Market Hemorrhages $1TRILLION — As Nasdaq Slumps 3% Over Fears China is Winning AI 'Arms Race'
Stocks plummeted early Monday morning
Jan. 27 2025, Published 12:33 p.m. ET
The stock market crumbled early Monday morning, amid fears a Chinese startup developed an AI model that seems to be able to do anything its U.S.-based counterparts can - at a fraction of the cost.
That sent technology stocks into a freefall, as panicked investors reconsider if massive amounts of spending on US-based AI programs is worth it, RadarOnline.com has learned.
AI companies like Nvidia, led CEO Jensen Huang, have been challenged by a cheaper Chinese startup
The U.S. has long been at the forefront of cutting-edge artificial intelligence technology, and U.S. based companies like Nvidia, which calls California home, have greatly benefited. That in turn has helped fuel the stock market to new highs.
However, last week Chinese artificial intelligence startup DeepSeek unveiled a new chatbot that it says can do whatever Google and Open AI can do for much less money.
For example, DeepSeek said one of its latest AI models cost just $5.6 million to train. Meanwhile, OpenAI’s GPT model cost more than $100 million to train.
DeepSeek has promised to do AI cheaper than its U.S. counterparts.
The fear of cheaper, foreign-based AI caused a bloodbath in early market trading, with the tech-focused Nasdaq index down nearly 3.5 percent at the open.
Investors dumped a staggering $1 trillion of technology stocks in premarket trading, led by Nvidia, which saw its value slashed by $465 million in mere moments.
Nvidia makes the pricey high-end chips that help train the AI models. The company has grown to be one of the largest in the world and was thought to have cornered the market on tech.
But now investors fear foreign-based AI models may require fewer chips – and even less energy to power them.
Technology stocks shed over a trillion dollars worth of value.
Stocks had been enjoying a post-election honeymoon, with record highs being shattered on a near daily basis after the election of Donald Trump.
While the market tends to rise whether its a Republican or Democrat who takes office, investors are wondering how Trump's plan of higher tariffs and lower tax rates will play out.
Peter Esho of Esho Capital said: "The markets are scrambling to figure out what happens next, but for the time being, the market is pricing in a higher growth and higher inflation outlook."
Never Miss an
Daily updates from the heart of Hollywood, right to your inbox
By entering your email and clicking Sign Up, you’re agreeing to let us send you customized marketing messages about us and our advertising partners. You are also agreeing to our Terms of Service and Privacy Policy.
Big Bank were among the immediate big winners, with JPMorgan Chase CEO Jamie Dimon sending out a memo to staff congratulating Trump for defeating Kamala Harris.
JPMorgan Chase executives mentioned the message from Dimon — who has served as CEO for 19 years — as polls were closing in November.
It read: "As Jamie said yesterday, we must now 'begin the work of bringing our nation together and focusing on the pressing economic and global issues before us.'
"Our firm has a long history of working across the political spectrum and looks forward to engaging the new administration and elected officials in both parties."
Dimon also called the presidential election "one of the hardest fought and at times divisive elections in our recent history" in a statement to the Wall Street Journal.
He said: "Soon it will be time for all of us to unite behind our President elect and all of our national leaders."
"We must begin the work of bringing our nation together and focusing on the pressing economic and global issues before us."
