US tech giant Nvidia lost over a sixth of its value after the surging popularity of a Chinese artificial intelligence (AI) app spooked investors in the US and Europe. DeepSeek, a Chinese AI chatbot reportedly made at a fraction of the cost of its rivals, launched last week but has already become the most downloaded free app in the US.

Wall Street’s superstars tumbled as a competitor from China threatens to upend the artificial-intelligence frenzy they’ve been feasting on. The S&P 500 fell 1.5% Monday.

Yet many in Silicon Valley believe the broad sell-off is an overreaction to DeepSeek’s latest model, which they argue could spur wider adoption and utility of AI by radically lowering the technology’s cost,

DeepSeek stunned the tech world with the release of its R1 "reasoning" model, matching or exceeding OpenAI's reasoning model for a fraction of the cost.

Silicon Valley and Washington leaders said the app shows China can challenge the U.S. The Nasdaq lost 3 percent and chipmaker Nvidia shed $589 billion in market capitalization.