The rise of China’s DeepSeek and its groundbreaking AI advancements has shaken global markets, especially the tech sector. The reaction has been swift and intense — the Nasdaq-100 ($IUXX) fell 3.1% and the S&P 500 Index ($SPX) dropped 1.8%. Nvidia (NVDA) shares plunged 17% in a single day. DeepSeek’s ability to rival AI giants like OpenAI at a fraction of the cost has raised eyebrows. The company has shown that top-tier AI models can be built with far less reliance on expensive chips, sparking concerns about the future profitability of chipmakers and AI-heavy companies like Microsoft (MSFT) and Meta (META).
For Microsoft, this comes at a critical time. The company has been pouring money into AI infrastructure, with $80 billion in capex on AI-enabled data centers forecast for fiscal 2025. While these investments are aimed at solidifying its dominance, they also leave Microsoft financially exposed if cheaper alternatives like DeepSeek gain traction.
