US tech giant Nvidia lost over a sixth of its value after the rising popularity of a Chinese expert system (AI) app alarmed investors in the US and Europe.


DeepSeek, a Chinese AI chatbot supposedly made at a fraction of the cost of its rivals, released last week but has currently become the most downloaded complimentary app in the US.


AI chip giant Nvidia and other tech firms connected to AI, consisting of Microsoft and Google, saw their worths topple on Monday in the wake of DeepSeek's unexpected increase.


In a different development, DeepSeek stated on Monday it will briefly limit registrations because of "massive destructive attacks" on its software.


What is DeepSeek and why did it trigger tech stocks to drop?


The DeepSeek chatbot was supposedly developed for a fraction of the cost of its competitors, raising questions about the future of America's AI supremacy and the scale of financial investments US firms are preparing.


Recently, OpenAI joined a group of other companies who pledged to invest $500bn (_ 400bn) in constructing AI infrastructure in the US.


President Donald Trump, in among his first announcements considering that returning to office, called it "the biggest AI facilities job by far in history" that would help keep "the future of innovation" in the US.


DeepSeek is powered by the open source DeepSeek-V3 design, which its researchers declare was trained for around $6m - considerably less than the billions invested by rivals.


But this claim has been disputed by others in AI.


The researchers state they use currently existing innovation, along with open source code - software application that can be used, modified or distributed by anyone totally free of charge.


DeepSeek's development comes as the US is restricting the sale of the advanced chip technology that powers AI to China.


To continue their work without stable materials of imported advanced chips, Chinese AI developers have shared their work with each other and explored with new methods to the innovation.


This has actually resulted in AI models that need far less computing power than before.


It also implies that they cost a lot less than previously believed possible, which has the possible to upend the market.


After DeepSeek-R1 was launched earlier this month, the company possessed "performance on par with" among OpenAI's latest models when used for jobs such as mathematics, coding and natural language thinking.


Silicon Valley investor and Trump consultant Marc Andreessen explained DeepSeek-R1 as "AI's Sputnik moment", a reference to the satellite launched by the Soviet Union in 1957.


At the time, the US was thought about to have been captured off-guard by their rival's technological achievement.


DeepSeek's sudden appeal has surprised stock markets in Europe and the US.


In the US, AI chipmaker Nvidia ended Monday's trading having actually plunged 16.9% while its rival Broadcom plunged 17.4%.


Other tech firms also sank, with Microsoft down 2.14% and Google's owner Alphabet down over 4%.


In Europe, Dutch chip equipment maker ASML ended Monday's trading with its share rate down by more than 7% while shares in Siemens Energy, which makes hardware related to AI, had plunged by a 5th.


"This concept of an affordable Chinese version hasn't necessarily been forefront, so it's taken the market a bit by surprise," stated Fiona Cincotta, senior market analyst at City Index.


"So, if you suddenly get this low-cost AI model, then that's going to raise concerns over the profits of competitors, particularly offered the amount that they've currently invested in more costly AI facilities."


Singapore-based technology equity advisor Vey-Sern Ling informed the BBC it might "potentially thwart the financial investment case for the entire AI supply chain".


But Wall Street banking giant Citi cautioned that while DeepSeek might challenge the dominant positions of American companies such as OpenAI, problems faced by Chinese companies might obstruct their advancement.


"We estimate that in an inevitably more limiting environment, US access to more advanced chips is an advantage," analysts said in a report.


Meanwhile, DeepSeek said on Monday it had actually been the victim of a cyberattack.


"Due to massive destructive attacks on DeepSeek's services, we are briefly limiting registrations to guarantee continued service," it stated in a declaration.


"Existing users can log in as normal. Thanks for your understanding and assistance."


Who founded DeepSeek?


The company was established in 2023 by Liang Wenfeng in Hangzhou, a city in southeastern China.


The 40-year-old, an info and electronic engineering graduate, likewise established the hedge fund that backed DeepSeek.


He supposedly developed a store of Nvidia A100 chips, now banned from export to China.


Experts believe this collection - which some estimates put at 50,000 - led him to introduce DeepSeek, by matching these chips with more affordable, lower-end ones that are still available to import.


Mr Liang was recently seen at a conference in between market professionals and the Chinese premier Li Qiang.


In a July 2024 interview with The China Academy, Mr Liang stated he was amazed by the response to the previous version of his AI model.


"We didn't anticipate pricing to be such a sensitive issue," he stated.


"We were merely following our own speed, computing costs, and setting rates accordingly."


Additional reporting by Joao Da Silva and Dearbail Jordan.