One question has made investors increasingly nervous in recent months: How much of the tech rally is driven by AI hype, and how vulnerable are the trillion-dollar valuations to negative shocks? On Monday, a rather unsettling answer emerged: Even subtle hints that things might not go as hoped are causing massive market values to evaporate. Within minutes, the chipmaker Nvidia, which is considered the top beneficiary of the AI rally, saw nearly 400 billion dollars in market capitalisation vanish. That amount is only 100 billion dollars less than the 500 billion dollars US President Trump proudly announced last week as an investment for his Stargate project aimed at building AI infrastructure.

This shows that bets on AI have long since outpaced even the most ambitious investment plans. The trigger for the stock plunge was reports about the performance of the Chinese ChatGPT rival DeepSeek. Its AI model, which was launched only in January, is said to be not only as powerful as the current leader in the field, but also to have achieved this performance using much less powerful processors, and far less financial investment. Naturally, this is leading to growing doubts about the previously assumed US dominance in the AI field.

But how valid is the concern? There are at least arguments to suggest that the panic among investors may be overblown. Access to the most advanced US semiconductor technology has only effectively been blocked for the Chinese since the fall of 2023. Meanwhile, DeepSeek has been trained on Nvidia AI chips that were already purchased before that. Additionally, the actual investment is not fully transparent. Chinese hedge fund manager Liang Wenfeng has likely invested more than he suggests. Allegedly, it was less than 6 million dollars. The development time is estimated at only two months. However, the hardware was acquired in 2021. Still, this is bad news for hardware manufacturers like Nvidia, as it appears that much less computational power is needed to train AI models than previously assumed.

A direct rivalry between ChatGPT and DeepSeek is unlikely to emerge – at least in most markets. On Monday, DeepSeek was at the top of the charts in both the German and US App Stores. But given that the United States already intervenes in steel sector acquisitions, and doesn't want the social media platform TikTok in Chinese hands, banning AI apps from China is likely just a matter of time.

Many US citizens do not seem to share their government's concerns about Chinese espionage. In the case of TikTok, the majority of younger US citizens were either indifferent, or simply unaware that a Chinese company owned the social media platform.

The success of DeepSeek is primarily a wake-up call for the US government, showing that China is closer to the Silicon Valley giants in the AI race than previously thought. The Trump administration will likely only intensify its efforts to keep the Chinese away from cutting-edge hardware. Meanwhile, the European Union, which proudly patted itself on the back last year for being the first jurisdiction to introduce legislation on the use and development of generative artificial intelligence with the AI Act, is looking foolish. In the US and China, innovation is happening, while in the EU, regulation prevails: The prejudice that was frequently heard at the World Economic Forum in Davos last week seems to be confirmed here as well. Above all, it shows that in the trillion-dollar AI game, it's not so much about how much is invested, but rather what the outcome is. Nvidia is likely aware of this. The company has already beaten Intel, a rival with a much fuller war chest.