Shares of Oracle (ORCL -14.82%) are sinking Monday. The firm's stock had lost 14.2% as of 2:45 p.m. ET, but was down as much as 15.5% earlier in the day. The surge comes as the S&P 500 and Nasdaq Composite lost 1.8% and 3.2%, respectively.

Oracle was hit by the big news of the day -- the revelation of the latest version of the Chinese artificial intelligence (AI) model DeepSeek -- as well as complications with President Trump's AI initiative.

DeepSeek deeply spooks Wall Street

A Chinese firm created the AI model DeepSeek, which is capable of competing with top models from OpenAI and Amazon, for a fraction of the price. DeepSeek R1, the newest version, was released last week, sending shockwaves through the world of AI. It was revealed that not only was R1 trained for just millions of dollars -- equivalent U.S. models take billions -- it was trained using underpowered Nvidia chips. Despite these limitations, it performs on par with its U.S. rivals.

AI stocks were hit across the board, but especially infrastructure players like Oracle. Some investors believe the significantly more efficient model will drastically reduce the need for the data centers Oracle and others operate.

I would exercise caution here. There is a lot of fear and speculation circulating around this news, but there is ample reason to believe this could ultimately be good for the industry, data center operators included. The increased efficiency could lead to better AI applications and, ultimately, increased demand.

Project Stargate could have funding issues

Oracle's stock jumped last week on the announcement of Project Stargate. President Trump held a press conference featuring, among others, Oracle CEO Larry Ellison to detail the new initiative. However, details were light, and where the full $500 billion promised would come from remains unclear. Furthermore, it was revealed that some of it would be expected to come from debt financing, disappointing investors.