Key takeaways:

• Wall Street experienced significant declines due to China's DeepSeek presenting a challenge to U.S. AI giants.
• Major tech stocks, including Nvidia, saw considerable drops, affecting overall market performance.
• Analysts express skepticism about the potential impact of DeepSeek on the AI supply chain.
• Investor behavior shifted towards safer bonds amidst market uncertainty.
• The event reflects increasing competition in the global AI landscape.

NEW YORK — Wall Street is witnessing dramatic shifts as investor confidence shakes in light of a competitive threat from China’s DeepSeek, a company that claims to have developed an advanced large language model, capable of rivaling U.S. AI giants at a significantly lower cost. This news plunged the S&P 500 down by approximately 1.7% during Monday’s midday trading, indicating a potential for its worst day in over a month given the volatility surrounding tech stocks. Notably, Nvidia’s shares fell sharply, recording a decrease of up to 14.4%, which in turn dragged down the Nasdaq composite by 2.8% (Source - HuffPost, Source - VOA News).

The shake-up originated from the announcement by DeepSeek, whose app reportedly climbed to the top of Apple’s App Store charts by Monday morning—a notable achievement considering the U.S. government's attempts to restrict top AI chips from reaching Chinese firms. Analysts, however, remain skeptical regarding the actual impact of DeepSeek's capabilities on the AI supply chain, from semiconductor manufacturers to utilities needed for data-intensive operations (Source - LA Times, Source - Al Jazeera).

"It remains to be seen if DeepSeek found a way to work around these chip restrictions and what chips they ultimately used," said Dan Ives, analyst at Wedbush Securities, shedding light on the prevailing skepticism regarding the authenticity of DeepSeek’s breakthrough.

While AI stocks suffered substantially, the Dow Jones Industrial Average—less reliant on technology—only dipped 0.1%. The market's reaction saw investors shift their focus towards bonds, driving the yield of the 10-year Treasury down from 4.62% to 4.54% as uncertainty increased (Source - VOA News). This trend underlines a sharp reversal for stocks that had previously enjoyed tremendous growth amid the AI boom, as many major players had thrived in the anticipation of a transformative economic landscape fueled by extensive investment in AI.

The implications of this shift are profound, especially considering the concentration risk, where a small group of companies—referred to as the "Magnificent Seven”—dominate the market. This dominance is illustrated by the fact that these companies—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—accounted for over half of the S&P 500's returns last year. Brian Jacobsen, Chief Economist at Annex Wealth Management, cautioned against overreacting to the market's turbulence, suggesting that while the current news could be overstated, it might also present new investment possibilities moving forward.

With ongoing concerns, attention now turns to upcoming earnings reports from tech giants including Apple, Meta, Microsoft, and Tesla, as these could further influence stock performance in a tightening financial climate.

For more information, check the original articles from HuffPost, VOA News, LA Times, and Al Jazeera.