Blood Monday is coming. Nasdaq futures fell 4% as Chinese artificial intelligence company DeepSeek's latest model shows the same ability as OpenAI but at only a fraction of the cost, shaking the global tech industry and raising doubts that current U.S. tech giants' billion-dollar spending is worthwhile.

DeepSeek-R1-Zero, a model trained via large-scale reinforcement learning (RL) without supervised fine-tuning (SFT) as a preliminary step, performs reasoning tasks at the same level as OpenAI's o1. However, the R1 model runs queries at a mere $0.14 per million tokens compared to OpenAI's $7.50, making it roughly 98% cheaper.

The model soon hit No. 1 on the Apple App Store's Top Free Apps Chart. It's free and open-source, so researchers can study and build on the algorithm. Published under an MIT license, the model can be freely reused without training data shown.

But it's enough to kill the current sky-high valuation market. The cost-effective computing power puts tech giants' massive ambitions on Nvidia chips in doubt, pushing the overall market lower in overnight trading. Nasdaq 100 futures tumbled 4.2%, S&P 500 futures fell nearly 2.4%, while Nvidia and TSMC dropped 11%, and Amazon, Google, and Meta dropped nearly 4%.

DeepSeek shows that it is possible to develop powerful AI models that cost less, said Vey-Sern Ling, managing director at Union Bancaire Privée. It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers.

Major Nvidia supplier Advantest Corp. slid as much as 8.6% in Tokyo. Shares of data center companies also slipped, with Singapore-listed Mapletree Industrial Trust down 3.6%.

Despite tightened chip controls, DeepSeek has succeeded in building an OpenAI-comparable model with much lower costs, implying a more effective approach and suggesting that the U.S. may even be lagging in the AI competition. In addition, tech giants' huge spending should be scrutinized as they may not need Nvidia's related chips as much as they think. However, everything is still uncertain.