Chinese startup DeepSeek claims to offer competitive AI models at lower costs, raising doubts about U.S. tech giants' investments in AI. Microsoft and Meta defend their significant spending, highlighting its importance for long-term strategic advantage amidst increasing demand for AI solutions.

Entrepreneur Marc Andreessen, known for co-writing Mosaic, one of the world’s first web browsers, wrote Sunday on X that “DeepSeek R1 is AI’s Sputnik moment,” likening it to the space race between the U.S. and the Soviet Union and the event that forced the U.S. to realize that its technological abilities were not unassailable.

The tech-heavy Nasdaq composite closed down nearly 3% on Monday, with shares of AI-focused chipmaker Nvidia plunging 17% and shaving nearly $590 billion from the company’s market cap.

DeepSeek, a Hangzhou-based startup founded in 2023, shot to the top of Apple’s App Store free app chart after releasing a new open-source AI model it says rivals OpenAI's work. Its website was hit by outages amid a spike in interest.

This options-trading strategy monetizes the belief that tech is a 21st-century battlefield that the U.S. will continue to dominate.

Technology stocks regained ground on Tuesday, a day after a low-cost Chinese AI model rattled markets, while traders rotated back into the dollar from safe-haven currencies. The tech rebound boosted Wall Street's main stock indices,