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Tech stocks tumbled on Monday as advances by Chinese artificial intelligence start-up DeepSeek cast doubt on whether the US could sustain its leadership in AI by spending billions of dollars on chips.

DeepSeek last week released its latest large language AI model, which achieved a comparable performance to those of US rivals OpenAI and Meta but claims to use far fewer Nvidia chips.

The results sent a shockwave through markets on Monday, with Nvidia on course to lose more than $300bn of market value, the biggest recorded drop for any company, as investors reassessed the likely future investment in AI hardware.

“DeepSeek R1 is AI’s Sputnik moment,” venture capital investor Marc Andreessen wrote on X, drawing a comparison with the wake-up call to the US from the Soviet Union’s success in putting the first satellite into orbit.

Shares in Nvidia, one of the biggest winners from the AI revolution, were down 11 per cent in pre-market trading. European chip equipment maker ASML was down 10 per cent. Microsoft fell 6 per cent and Meta slid 5 per cent. Stock futures pointed to a 4.2 per cent drop in the tech-heavy Nasdaq, while the S&P 500 index was set to decline 2.4 per cent.

The rout extended well beyond traditional tech names. Siemens Energy, which supplies electrical hardware for AI infrastructure, plunged 22 per cent. Schneider Electric, a French maker of electrical power products that has invested heavily in services for data centres, fell 9.2 per cent.

“It’s DeepSeek for sure,” said one Tokyo-based fund manager of the selling on Monday, adding that investors were rapidly assessing whether hardware spending on AI could ultimately be a lot lower than current estimates.

AI investment by large-cap US tech companies hit $224bn last year, according to UBS, which expects the total to reach $280bn this year. OpenAI and SoftBank announced last week a plan to invest $500bn over the next four years in AI infrastructure.

“It shows how vulnerable the AI trade still is, like every trade that is consensus and based on the assumption of an unassailable lead,” said Luca Paolini, chief strategist at Pictet Asset Management.

Founded by hedge fund manager Liang Wenfeng, DeepSeek last week released a detailed paper explaining how to build a large language model that could automatically learn and improve itself.

“It seems as if there is a bit of reality dawning that China has not been sitting idle, even as these tariffs and investment restrictions on tech companies have been put in place,” said Mitul Kotecha, Asia head of emerging markets macro and foreign exchange strategy at Barclays.

The US imposed stringent restrictions on chip exports to China under former President Joe Biden, banning the sale of Nvidia’s most advanced models to the country.

Some analysts cautioned that the market reaction was overdone and that DeepSeek’s advances would ultimately prove positive for AI chipmakers such as Nvidia.

Dylan Patel, chief analyst at chip consultancy SemiAnalysis, said cutting the cost of training and running AI models would over the longer term make it easier and cheaper for businesses and consumers to adopt AI applications.

“Advancements in training and inference efficiency enable further scaling and proliferation of AI,” said Patel. “This phenomenon has occurred in the semiconductor industry for decades, where Moore’s Law drove a halving of cost every two years while the industry kept growing and adding more capabilities to chips.”

Some Chinese tech stocks advanced amid the excitement over DeepSeek, although the wider CSI 300 index closed down 0.4 per cent. In Hong Kong Baidu closed 4 per cent up and Alibaba was up 3 per cent.

CHARLOTTE, N.C. — Tory Grimm-Oropesa moved to Charlotte from northern California in 2022. She then voted in two elections without incident. But after voting in November of last year, she received an unusual piece of mail.

“I got a postcard in the mail with a QR code on it that said my ballot was being challenged,” she said.

That postcard was from the campaign of Republican Jefferson Griffin, in a contest for a seat on the North Carolina Supreme Court. After two recounts in the swing state, Griffin is trailing Democratic incumbent Allison Riggs by a miniscule 734 votes out of more than 5.5 million ballots cast.

Griffin hasn’t pointed to any case of voter fraud, but he is contesting Grimm-Oropesa’s vote — along with roughly 65,000 others.

His challenge means that a bitter fight over a state high court seat is still working its way through the courts, more than 80 days after Election Day.

The next step comes Monday, when the 4th U.S. Circuit Court of Appeals will hear arguments, before ultimately deciding whether the case should be decided in federal court or in state court.

Meanwhile, Grimm-Oropesa is upset.

“It’s not a matter of I did something wrong or I’m trying to cheat in voting,” she said. “I voted in three different elections now, perfectly fine, never had an issue. So I don’t understand why this one and just this one result should be thrown out.”

3 buckets of challenged ballots

Riggs was appointed to the North Carolina Supreme Court in 2023 by then-Democratic Gov. Roy Cooper. She has recused herself from this case, and possibly deciding her own election.

But she has publicly criticized Griffin’s challenge. In a recent statement, Riggs said Griffin was wasting taxpayer dollars in “a baseless attempt to overturn his electoral loss.”

Griffin has said he can’t comment on his legal effort.

The list of challenged voters includes some elected officials. It also includes Riggs’ parents. The contested ballots are in three buckets:

• A little more than 60,000 of them are due to voters having incomplete registrations. At one point, North Carolina’s voter registration forms didn’t explicitly say that a driver’s license number or the last four digits of a Social Security number were needed. More than 200,000 voters statewide are believed to have missing information.
• Griffin is also challenging a small group of overseas voters who haven’t lived in North Carolina. 
• And then roughly 5,500 of the challenged ballots are also from overseas. Those voters didn’t show a copy of their photo ID when voting, and Griffin has argued they should be thrown out. These challenged ballots come from just four Democratic-leaning counties in the state.

The state Board of Elections had approved rules that didn’t require photo ID for overseas ballots. Those rules were then unanimously approved in March by the North Carolina Rules Review Commission, whose 10 members were selected by the Republican leaders of the state House and Senate.

And both Republicans and Democrats on the state Board of Elections in December rejected Griffin’s push to disqualify those voters.

Certification of the election has been blocked

GOP political consultant Paul Shumaker, who advised Griffin’s campaign, said it’s reasonable for a court to review the decisions made by the elections board and other agencies — even if they were bipartisan.

“Why are we going to have an appointed board be the final determination of the interpretation of our laws? Do we really want that?” he said. “We have judicial review of the legislative process. [What] about judicial [review] of the administrative process and how our elections are handled?”

The North Carolina Supreme Court has blocked certification of the election. But last week it said the challenge should first be heard in lower state courts, a setback for Griffin.

However Chief Justice Paul Newby, a Republican, appeared to support Griffin’s challenge. He also cast doubt over the entire election process.

In the ruling, he said Riggs’ ability to erase Griffin’s lead of 10,000 votes on election night was a “highly unusual course of events.” (It’s common in elections for one candidate to appear to be leading and then fall behind as all results are tallied.)

Newby wrote: “[T]his case is not about deciding the outcome of an election. It is about preserving the public’s trust and confidence in our elections through the rule of law.”

The state Board of Elections, which has a Democratic majority, has said the post-Election Day counting of mail ballots and provisional ballots followed state law.

Some Republicans are uneasy with Griffin’s challenge

As the dispute has dragged on, some Republicans say Griffin has gone too far.

Republican state Supreme Court Justice Richard Dietz wrote earlier this month that it would invite “incredible mischief” to have post-election litigation that “seeks to rewrite our state’s election rules” and “remove the right to vote in an election from people who already lawfully voted under the existing rules.”

Andrew Dunn, the communications director on an unsuccessful GOP campaign for governor four years ago, said the Democratic Party’s talk about threats to democracy are, in his view, usually overblown.

“However this case to me is different,” he said. “This case is about complaining about the results of an election and trying to go back and retroactively disqualify voters who cast ballots in good faith.”

Depending on court rulings, the state supreme court race could be re-tabulated — or a new election could be ordered.

Meanwhile, voters like Annie Rickenbaugh of Charlotte wonder if their challenged ballots will still count.

“I’m a regular person trying to pay my rent,” she said. “I don’t want to have to deal with this.”

She said she went to the county board of elections to re-register in the hopes her ballot is never challenged again.