The Broadcom (AVGO, Financial) shares fell steeply by 16% in trading on Monday as it joined the wider market sell-off, and investors fretted over DeepSeek's emerging threat to them. What's happened is AI tech giants like Unilever, Procter and Gamble, Danone, and more have made billions of dollars of investments in their AI visions, but Deep seek's new free-to-use AI model has taken off so fast that it's beginning to create serious doubts about the long term prospects of these multi-billion dollar investments.
As DeepSeek can construct an advanced AI model with less computing power and fewer resources than leading industry giants like Meta (META, Financial) and Nvidia (NVDA, Financial), what the money is forcing upon investors is its potential. The model runs at a fraction of the cost and requires fewer data, potentially a game-changing model to overturn the strong assumption that traditional AI development needs massive, expensive hardware.
U.S. companies like semiconductors and software firm Broadcom, one of its leading players, are under the heaviest scrutiny because of this breakthrough. Broadcom faces another competitive and volatile time in the tech market as it tries to navigate rising market volatility and jitters about economic pressures to come.
With the future of AI and the efficiency of capital with these models in doubt, investors are shying away from that selloff in semiconductors and tech stocks.
