U.S.-listed shares of tech giants are gaining some lost ground this morning after a China-based startup shocked the AI world with a powerful LLM. Yesterday, shockwaves rippled across the American tech industry after news spread over the weekend about a powerful new large language model (LLM) from China called DeepSeek.

Global investors are worried the emergence of a low-cost Chinese AI model will threaten the dominance of AI leaders.

Despite the negative financial impact, Nvidia praised DeepSeek’s breakthrough. “DeepSeek is an excellent A.I. advancement and a perfect example of test time scaling,” a company spokesperson told Observer in a statement.

That might be a bigger problem for investors. The AI app was created for a few million dollars, billions less than U.S. models like OpenAI. And it was all done without the top-of-the-line chips that require so much energy.

Artificial intelligence stocks got a major shake-up when Nvidia (NVDA), the leader in AI chips, notched their largest single-day plunge since 2020. On Jan. 27, Nvidia shares dropped by 17%, wiping out an astonishing $589 billion from Nvidia’s market capitalization.

In a surprising twist, Deepseek's cost-effective AI solution has rattled the stock market, raising eyebrows and sparking intense scrutiny from U.S. officials.