The sudden popularity of a Chinese artificial intelligence app called DeepSeek pummeled tech stocks and captivated Silicon Valley on Monday, prompting debate in political and tech industry circles about how the United States can maintain its lead in AI.

President Donald Trump said late Monday that DeepSeek’s release “should be a wake-up call for our industries that we need to be laser focused on competing to win.”

Trump separately said he planned to place new tariffs on computer chips produced overseas, a policy that could create further challenges for the U.S. tech industry, which depends heavily on chip manufacturing in Asia.

The DeepSeek app rocketed to the top of the downloads chart in the Apple store over the weekend and remained there Monday after its release last week by a Chinese startup of the same name founded in 2023. The app offers similar functionality to OpenAI’s popular ChatGPT chatbot, answering questions and generating text in response to a user’s queries.

Several tech companies that have banked on a surge of AI interest sold off Monday, with U.S. chipmaker Nvidia down almost 17 percent, losing $589 billion in market capitalization. The tech-focused Nasdaq composite index finished the day down 3 percent.

DeepSeek’s explosive debut also escalated concerns about China’s ability to challenge the U.S. lead in advanced artificial intelligence. Both nations have positioned prowess in AI technology as central to their future economic and military power.

The Biden administration introduced several measures intended to restrict Chinese AI development, including sweeping new export controls this month to limit the country’s access to powerful chips known as GPUs, which underpin advanced AI projects.

Those latest controls were in part aimed at blocking Chinese efforts to circumvent previous export controls.

Victoria LaCivita, a spokeswoman for the White House Office of Science and Technology, said former president Joe Biden’s policies had failed to limit access to American technology and created an opportunity for China and other foreign adversaries to make gains in AI development. David Sacks, President Donald Trump’s AI and crypto czar, said in a post on X that DeepSeek “shows that the AI race will be very competitive.”

The Trump administration has shared few specifics about its own approach to AI policy. The president last week rescinded a sweeping executive order on AI signed by Biden in 2023 and signed an executive order of his own directing agencies to rescind all actions taken under the Biden order “that are inconsistent with enhancing America’s leadership in AI.”

Trump in his remarks late Monday in Doral, Florida, said that the U.S. had the “greatest scientists in the world” and that American companies could benefit from building on DeepSeek’s ideas.

He also criticized the billions of dollars of grants provided to encourage U.S. semiconductor manufacturing under the Biden administration, although the 2022 Chips Act that provided the funding received bipartisan support at the time. Trump said that tariffs he planned to place on imports of foreign-made chips would be more effective, but did not specify details of that policy or when it might take effect.

DeepSeek was founded by Liang Wenfeng, co-founder of the hedge fund High-Flyer, and says it has developed ways to create the AI models needed to power chatbots and other tools more cheaply. It claims to need fewer and less advanced chips to develop AI software that can compete with technology from U.S. rivals.

Analysts said the Monday sell-off underscores anxieties about whether the massive recent spending by U.S. firms on specialized chips, data centers and related power infrastructure to power AI projects is justified.

Nvidia in particular has exploded in value in recent years because it dominates the market for the GPU chips at the center of the global AI race. It’s now one of three companies with a market capitalization above $3 trillion.

“Markets are sensitive to this situation, as heightened price competition raises doubts about the timing of when profits from multibillion-dollar investments will materialize,” Alex Kuptsikevich, chief market analyst at FxPro, said in an email Monday.

Nvidia spokesman John Rizzo in a statement Monday called DeepSeek an “excellent AI advancement” that shows what can be done with computing power that is “fully export control compliant.” Deploying advanced AI models requires “significant numbers” of Nvidia chips, he said.

Microsoft CEO Satya Nadella argued Sunday night that the huge investments in AI infrastructure will still pay off. “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of,” he wrote in a post on X. Microsoft stock dropped 2.1 percent Monday.

The House Select Committee on the Chinese Communist Party, which has advocated stronger technological sanctions against Beijing, said over the weekend that it had warned the Commerce Department that “dangerous loopholes” in U.S. chip export controls could lead to “events like this.”

Trump has said that the United States needs to remain competitive with China in developing artificial intelligence. He appeared focused on the technology during his first week in office, hosting tech leaders at the White House to announce a venture called Stargate that will invest $100 billion in private funds into new data centers to power AI projects.

Trump told reporters Saturday that he was considering using emergency powers to provide the “tremendous energy” that U.S. companies need to develop AI models. “We’re already leading,” Trump said on Air Force One. “Very shortly, we’re going to be leading by a lot.”

As Americans rushed to download the app, users also reported instances of censorship in line with China’s strict internet controls. One screen recording posted online appeared to show DeepSeek deleting a response in real time after a question about Chinese President Xi Jinping.

Asked about Tiananmen Square, site of a deadly government crackdown on protesters in 1989, the app responds: “I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses.”

DeepSeek also releases the AI model underlying its assistant app free, which some technologists argue allows others to subvert its design more easily than the products of competitors like OpenAI.

Across Silicon Valley, investors and executives debated what DeepSeek’s success meant for the future of AI development.

Longtime technology investor Marc Andreessen, a Trump ally, called DeepSeek’s AI model “one of the most amazing and impressive breakthroughs I’ve ever seen” and “a profound gift to the world” in a post on X.

Former Intel CEO Pat Gelsinger posted that “Wisdom is learning the lessons we thought we already knew,” saying that DeepSeek was a reminder that constraints and limited resources could push a company to find creative solutions.

Leading tech firms have spent billions building out artificial intelligence technology for sale to large businesses. Meta chief executive Mark Zuckerberg said in a Facebook post last week that his company plans to invest between $60 billion and $65 billion on AI and build a massive data center. OpenAI, Oracle and SoftBank are leading the Stargate venture announced with Trump last week that seeks to spend up to $500 billion building out data centers to support AI projects.

Monday’s sell-off also shaved 1.46 percent off the broader S&P 500 index. The Dow Jones Industrial Average, which contains fewer tech stocks, gained 0.6 percent. Wall Street’s fear gauge, the CBOE Volatility Index, climbed almost 22 percent.

Some analysts suggested that Wall Street’s reaction may be a premature reflection of fear in the markets, noting that U.S. companies have dominated artificial intelligence innovation so far. WedBush senior analyst Dan Ives, who has been bullish on AI, called Monday’s rout a “golden buying opportunity” despite the reaction in U.S. markets.

previous coverage

• DeepSeek has rattled the AI industry. Here’s a quick look at other Chinese AI models

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