C3.ai, Inc. plunged 6.43% in pre-market trading on Monday, January 27th, as concerns grew over the impact of a Chinese AI startup's recent achievements on the established players in the artificial intelligence space.

DeepSeek, a startup based in China, has reportedly developed large language models (LLMs) that perform on par with those developed by tech giants like OpenAI, Google, and Meta. However, DeepSeek claims to have achieved this feat at a fraction of the cost incurred by these US companies. This has raised questions about the need for the massive capital spending increases planned by the major tech firms to dominate the AI market with their expensive AI services and infrastructure.

Analysts warn that if cheaper alternatives like DeepSeek's models gain traction, it could weigh on the earnings and profit margins of US tech firms investing billions into expensive AI hardware and infrastructure. There are also concerns that demand for AI chips from companies like Nvidia could be impacted if DeepSeek's approach reduces the need for expensive compute power to develop AI systems.