US tech stocks fall on cheap Chinese AI launch, Nasdaq down 2% at one point

2026-07-17

Major technology stocks were sold off sharply in the US stock market on the 17th after a Chinese company unveiled a new model that matched leading US artificial intelligence (AI) models in performance while keeping usage fees lower. Investors increasingly saw the advantage of US AI companies as under threat.

Tech stocks sold off

The Nasdaq Composite Index, which has a high weighting of technology stocks, at one point fell as much as 2% from the previous day. The S&P 500 Index, widely tracked by institutional investors, also dropped by more than 1% at one point.

Spread to semiconductors

Alphabet, the Google parent that develops AI models, fell about 3%, while Meta dropped about 4%. Semiconductor stocks also declined broadly, with AI chip giant Nvidia down about 4% and memory maker Micron Technology off about 5%.

Low-cost Chinese AI models have repeatedly rattled US tech stocks. When China's DeepSeek introduced its then-cutting-edge R1 model in January 2025, concerns grew that US AI dominance was slipping, sending the market value of US tech stocks sharply lower.

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