Chinese AI Startup DeepSeek Faces Cyberattack and Market Fallout

The Chinese AI startup DeepSeek has encountered a significant cyberattack on its systems, leading to disruptions amidst rising concerns in global tech markets. On Monday, following the announcement of this attack, tech stocks witnessed a dramatic decline, resulting in losses amounting to hundreds of billions of dollars.

DeepSeek launched its AI assistant just last week, which quickly ascended to the top position on the Apple App Store, surpassing the popular ChatGPT platform developed in the US. The company asserts that its latest model is on par with advanced models from Western companies, yet it operates at a significantly lower training and operational cost.

"Due to large-scale malicious attacks on DeepSeek's services, we are temporarily limiting registrations to ensure continued service," noted a statement on the company's website. "Existing users can log in as usual."

According to reports, the DeepSeek website has experienced sporadic outages, marking the most significant disruptions seen in the last three months.

The AI assistant operates on the DeepSeek V3 and R1 models, which the company claims "rivals the most advanced closed-source models globally."

DeepSeek's recent success has also posed challenges to U.S. strategies aimed at restricting Chinese access to advanced semiconductor technologies from the U.S. and other countries. Recently, the company revealed that it utilized Nvidia's H800 chips—exempt from the existing bans—for training its latest AI model and spent less than $6 million on this process.

Despite some skepticism from U.S. analysts regarding these claims, the market response was severe. Nvidia, for instance, suffered a staggering loss of over $600 billion in market capitalization during Monday's trading session, marking the largest wipeout in history. Other firms, including Oracle, also faced declines, contributing to a near 3% drop in the Nasdaq Composite Index and pushing the S&P 500 toward its worst performance in over a month.

Further impacts were felt in international markets, with the Amsterdam and Tokyo stock exchanges registering declines linked to substantial losses at Dutch chipmaker ASML and Softbank, respectively. Just a week prior, Softbank had announced a partnership with Oracle and OpenAI, which aimed to invest up to $500 billion in AI development in the U.S.

AI, Cyberattack, Market, Tech, Investments