It didn’t take much, just the words “DeepSeek” and “AI breakthrough” in the same sentence, and suddenly the stock market was in free fall. The Chinese AI startup announced a major advancement in AI models and large language models (LLMs) this week. And while that sounds like something to celebrate, investors in semiconductor companies like NVIDIA and Broadcom reacted as if the sky was falling.

What Did DeepSeek Do?

DeepSeek’s latest innovation promises to disrupt the AI landscape with what it claims is a more efficient and scalable approach to building and deploying AI models and LLMs. While details were scarce and buzzwords plentiful, the implications sent shockwaves through the semiconductor world. The fear? If DeepSeek’s technology reduces the reliance on massive computational power, demand for high-end GPUs and chips, staples of companies like NVIDIA and AMD, could take a hit.

Adding to the drama is the revelation that DeepSeek reportedly needed only $6 million worth of raw computing power to train its groundbreaking system, a fraction of what AI titans like OpenAI and Google are spending. Meanwhile, President Trump has announced his desire to allocate $500 billion to bolster U.S.-based AI companies. If DeepSeek’s claims hold water, it’s a stark reminder that innovation doesn’t necessarily come from throwing cash at the problem, but perhaps from finding smarter, leaner ways to solve it.

NVIDIA and Broadcom Take a Hit

NVIDIA, the darling of AI hardware, led the losses with its stock down nearly 17% by market close. Broadcom, another semiconductor titan, wasn’t far behind. Both companies have been enjoying a golden age thanks to their dominance in supplying the chips powering today’s cutting-edge AI models. But now, DeepSeek’s announcement raises uncomfortable questions: What if the future of AI doesn’t need their hardware as much as the past has?

This kind of knee-jerk reaction is nothing new for the market, where even the faintest whispers of disruption can send investors into a frenzy. But the timing couldn’t have been worse, with bond yields climbing and inflation fears already weighing on tech stocks.

What’s Next?

For now, DeepSeek is a wildcard, a company with bold claims but little proven track record. Whether its innovations actually reduce the reliance on high-performance chips remains to be seen.

In the meantime, semiconductor stocks are bracing for a rocky few days. As one analyst quipped, “The market loves a good panic. It just forgot to wait for the footnotes”.

Whether this is the start of a genuine shift or just another AI-fueled overreaction, one thing’s clear: DeepSeek has everyone talking.