NEW YORK (KGO) -- Monday was a rough day for tech stocks on Wall Street after a Chinese company called DeepSeek announced its new artificial intelligence tool.
Analysts say it can do what the other models can but it's a lot cheaper to operate.
DeepSeek is beating out OpenAI's ChatGPT as the most popular free app in the Apple App store.
A one-year-old startup, its AI model is similar to ChatGPT.
"Even in the design, even in the layout on the desktop or on the phone, it's exactly like what ChatGPT is doing," said Professor Ahmed Banafa of San Jose State.
But there's one key difference - DeepSeek did it at a fraction of the price.
"Companies like OpenAI or Gemini from Google, in order for them to train their models," Banafa said, "They spent hundreds of millions of dollars."
In contrast, DeepSeek says it spent only $5.6 million.
Part of that low-cost has been because DeepSeek has used under-powered AI Chips, instead of High-power AI chips.
"Less resources, less costs, more efficiency," said Mark Hamrick, a senior economic analyst with Bankrate.
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The U.S. has restricted high-power AI chips to China over national security concerns, leading DeepSeek to develop its model with the less-expensive chips. The model is also entirely free to users.
All factors that led to an historic stock selloff Monday, with shares for Silicon-Valley's Nvidia tumbling 17%, the largest single day loss on record worth almost $600 billion in market value.
"Essentially those who thought that spending would be much more robust in this space at higher prices for companies like NVIDIA or Broadcom are now concerned that well some of those profits and some of that spending is put at risk," Hamrick said.
Since 2022 tech stocks have seen a boom because of AI, now DeepSeek could see a turning point in the level of investment needed in AI.
Experts though say there's no need to cry for tech giants like Nvidia yet.
"Nvidia is a strong company. So, this is just a shock," Banafa said, "Nvidia is going to recover from this"
Still, they say DeepSeek speaks to the many players outside the United States entering the AI development game and the need for U.S. companies to stay competitive.
"It's going to be on the side of OpenAI and Google to make sure that they are different, and they have something special to offer," Banafa said.