By George Glover

Nvidia stock was plummeting early Monday after the rapid rise of a Chinese company's new artificial intelligence chatbot raised concerns about how long the U.S. tech rally can last.

Shares in the chip maker plunged 10.5% to $127.74 ahead of the opening bell. Futures tracking the benchmark S&P 500 index were down 2%.

Rival stocks were also tumbling. Broadcom fell 10.2% in the premarket, while Advanced Micro Devices sank 4.5% and Qualcomm dropped 2.8%. Dutch-listed shares in the semiconductor equipment maker ASML were down 11.1% in European trading.

The big selloff came as Silicon Valley raved about Chinese company DeepSeek's new model R1, which appears to perform at a similar level to rivals such as OpenAI's ChatGPT even though it was seemingly developed at a fraction of the cost.

DeepSeek said it had spent just $5.6 million training R1. Even though that headline figure excludes research and development expenses, it pales in comparison with the tens of billions of dollars U.S. Big Tech companies are plowing into developing AI models of their own.

DeepSeek developing its chatbot on the cheap calls into question whether Nvidia's earnings will carry on rising at such a rapid pace. The company's shares have soared more than 900% since the end of October 2022, powered higher by sky-high demand for its chips amid an AI spending boom.

Write to George Glover at george.glover@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 27, 2025 05:28 ET (10:28 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.