US stocks took a sharp drop - and experts are feeling wary - after a Chinese artificial intelligence startup posed a threat to America's technology industry.

DeepSeek unveiled a new ChatGPT-like AI model called R1 that operated at a fraction of the cost of OpenAI’s, Google’s or Meta’s models, causing the Nasdaq to plunge by 3.1 percent. 

US markets analyst Scott Shellady says the $5.6 million computing power cost will be concerning for investors, when compared to the hundreds of millions or billions US companies spent.

"The idea that there was any competition would have probably surprised people, which it did."

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