Did China’s AI Startup DeepSeek Cause a U.S. Tech Stock Crash? What Should Investors Do?

S&P500 Daily Chart

Chinese AI startup DeepSeek recently launched its new AI model, and this news was widely spread by Chinese government-affiliated social media accounts. As a result, DeepSeek’s AI assistant surpassed ChatGPT in downloads on Apple’s App Store. This triggered a massive sell-off in U.S. tech stocks, leading to Nvidia’s largest single-day loss in history. Meanwhile, Microsoft’s stock also declined due to heavy capital investments. The U.S. government is investigating whether DeepSeek illegally used U.S. chips, but no solid evidence has been found yet.

Future Outlook and Predictions

1. Intensified AI Market Competition

The rise of DeepSeek is expected to further accelerate competition in the AI industry. Companies like Nvidia and Microsoft, which have invested heavily in high-performance AI semiconductors and data centers, may face increasing price competition from Chinese firms.
The U.S. has attempted to suppress China’s AI industry through semiconductor restrictions, but China has been actively developing its own technologies to counter these measures. DeepSeek’s success serves as a clear indication that this technological race is intensifying.

2. Short-Term Instability in Tech Stocks

Currently, AI-related tech stocks are experiencing high volatility, leading to increased investor uncertainty. Nvidia recorded its largest-ever single-day market value loss, while Microsoft’s stock also declined due to concerns over capital expenditures. However, this sharp drop may only be temporary.
Historically, stock markets have shown a tendency to recover after panic-driven selloffs. If we consider past trends, major tech stocks have rebounded over time. However, if the growth rate of U.S. companies slows down while Chinese firms continue to expand rapidly, the recovery of U.S. tech stocks may take longer than usual.

3. Impact of U.S. Regulations on Chinese AI Firms

The U.S. Department of Commerce has launched an investigation into DeepSeek’s technological development. If it is found that DeepSeek illegally used U.S. chips, stricter regulations on Chinese AI firms may follow. Such measures could include further restrictions on semiconductor exports, limiting China’s access to critical AI hardware.
However, China has historically adapted quickly to such regulatory challenges by accelerating independent technological advancements. Given this, it remains uncertain how effective additional U.S. regulations would be in curbing China’s AI progress.

4. Key Points for Investors

• AI market competition is heating up, and the winners will be those who can adapt quickly.
• Short-term instability in tech stocks is expected, but long-term recovery remains a possibility.
• U.S. regulatory actions against Chinese AI firms could shape the market landscape.
• Key AI-related stocks such as Nvidia, Microsoft, and Meta should be closely monitored.

Explanation for Beginners

The market is currently volatile, but the AI industry continues to grow, making this a potential opportunity to start investing.

✅ What should you do?

• Consider buying AI-related stocks
  　Nvidia (NVDA) and Microsoft (MSFT) are highly competitive in the AI sector and are expected to grow further. Their stock prices are currently in a correction phase, which may present a good buying opportunity for long-term investors.
• Invest gradually instead of all at once
  　Rather than investing a large sum at once, consider dollar-cost averaging, where you buy small amounts regularly. This strategy can help reduce the impact of market fluctuations and build your portfolio steadily.
• Stay informed and monitor trends
  　News about the AI industry and U.S. regulations will continue to influence the market. Keep an eye on DeepSeek’s developments and U.S. policy decisions to make well-informed investment choices.

If you’re looking for long-term growth, now might be the right time to invest. Start small and get ready to ride the AI wave!