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Global technology stocks continued their downward spiral on Tuesday, deepening a selloff sparked by the emergence of DeepSeek, a low-cost Chinese AI disruptor.

Investors around the world are still reeling after Monday’s rout, which saw Nvidia suffer a record $593 billion one-day loss in market value.

The ripple effect wiped billions off tech valuations across the globe, prompting questions about the sustainability of current AI-driven market dynamics.

Tuesday brought slight relief to U.S. markets, with Nvidia shares rebounding nearly 6% in Frankfurt and Oracle and Palantir posting modest gains of 3.4% and 2.97%, respectively.

However, European tech stocks remained under pressure, with semiconductor firms ASML, Schneider Electric, and Infineon all continuing to fall.

In Asia, the slump persisted, with Japanese chip-testing equipment maker Advantest dropping another 10%, adding to Monday’s 9% loss, and SoftBank Group sliding 5%.

The selloff was triggered by DeepSeek’s surprising debut last week, unveiling a free AI assistant that it claims was developed for a fraction of the cost of existing AI services.

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Using Nvidia H800 chips, the Chinese startup reportedly trained its model for under $6 million, a startling contrast to the billions spent by established AI leaders like OpenAI and Google.

The announcement sent shockwaves through the market, challenging assumptions about China’s lag in AI development and rattling investor confidence in U.S. tech dominance.

Skepticism remains about DeepSeek’s cost claims, but its sudden rise has shifted perceptions globally.

OpenAI CEO Sam Altman described the company’s model as “impressive,” calling the competition invigorating, while President Donald Trump labeled DeepSeek’s breakthrough “a wake-up call for our industries.”

Still, the disruption has caused a global investor retreat, with panic selling stretching from Silicon Valley to Tokyo.

In Europe, semiconductor companies struggled to regain footing after Monday’s losses. ASML, which fell 7.1% on Monday, dipped an additional 1% on Tuesday, reversing early gains.

Meanwhile, in Japan, heavily exposed firms like Advantest and SoftBank bore the brunt of continued selloffs. The Philadelphia semiconductor index in the U.S. also suffered its worst drop since March 2020, falling 9.2% on Monday as concerns about AI sector saturation grew.

Monday’s massive selloff brought to light the precarious valuations of tech giants, particularly Nvidia, which was trading at nearly 60 times its earnings—nearly triple the S&P 500 average.

“The hype around AI has led to inflated valuations that leave no room for error,” said David Bahnsen, chief investment officer at The Bahnsen Group, according to Reuters.

“Investors are now realizing the underappreciated risks of having these stocks dominate both portfolios and market indices.”

Adding to the volatility is the heavy leverage many investors used to buy into AI’s meteoric rise.

Monday’s downturn likely forced mass asset liquidations to cover losses, compounding the selloff.

Algorithmic trading models, which dominate today’s markets, also appear to have amplified the downward pressure, according to Rob Almeida, global investment strategist at MFS International.

“Leverage, AI supply chain concerns, and robots selling simultaneously—it all exacerbates the situation."

The broader context of the selloff underscores how reliant global markets have become on AI-driven growth.

Since the launch of OpenAI’s ChatGPT in 2022, tech stocks have fueled a $10 trillion increase in the market value of leading firms like Nvidia, Microsoft, and Alphabet.

Yet the sudden appearance of DeepSeek, paired with its open-source strategy and low-cost claims, has exposed vulnerabilities in a market built on sky-high valuations.

DeepSeek’s rise has upended the narrative that U.S. companies had a comfortable lead in AI.

Investors are now grappling with the implications of this new competitor, one that seems to have redefined the cost-efficiency of AI development. As DeepSeek’s presence grows, it may force global AI leaders to rethink their strategies, particularly as valuations remain under scrutiny.

Tuesday’s extended selloff is a stark reminder of how volatile the tech sector has become, especially when the AI hype meets unexpected challenges.

DeepSeek’s sudden emergence has shaken investor confidence, exposing the fragility of a market that has relied heavily on sky-high valuations and relentless optimism.

The question now isn’t just about who leads the AI race—it’s about whether the sector can sustain its momentum when faced with new competition, rising skepticism, and an increasingly unpredictable global landscape. For investors, the road ahead looks uncertain, with more questions than answers about how far this disruption will go.

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