DeepSeek’s rattling of US tech stocks could change how America sanctions China: analysts

But no consensus on whether impact of Chinese AI start-up will hasten tech decoupling of the two economies or sow greater partnership

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DeepSeek has created an open-source product comparable to its US competitors for what appeared to be a fraction of the cost. Photo: Reuters

Mark Magnierin New YorkandKhushboo Razdanin Washington

Published: 7:36am, 29 Jan 2025Updated: 12:01am, 30 Jan 2025

The earthquake that struck US tech stocks this week over the advance of Chinese artificial intelligence start-up DeepSeek is sending shock waves beyond Wall Street and Silicon Valley, threatening to alter Washington’s sanctions, export bans and ‘high-fence, small-yard’ scheme that has irked Beijing.

On Monday, the Nasdaq Composite Index retreated more than 3 per cent, led by a sharp fall in shares of chipmaker Nvidia and other leading American tech firms before recovering partially on Tuesday as investors absorbed the news.

US-China analysts were divided as to whether the developments would hasten a tech decoupling of the world’s two largest economies or sow greater partnership.

Bilateral collaboration “could provide opportunities for the US to learn from China’s advancements and apply those lessons domestically”, according to Yilun Zhang of the Institute for China-America Studies, a Washington-based think tank, even amid a challenging political reality.

“The themes of decoupling, export controls and investment screening will likely continue to dominate US policy,” Zhang said, as they would in China, others added.

The jolt hit as soon as financial markets opened on Monday and after word spread that DeepSeek had created an open-source product comparable to its US competitors for what appeared to be a fraction of the cost.