U.S. equity markets are set to open deep in the red as investors begin to digest the significance of DeepSeek’s AI reasoning model R1.

The U.S. has imposed export controls on the most advanced computer chips, forcing the Chinese developers to optimize their new model using much less capable chips. This spooked the markets, and the stocks of U.S. chip makers like Nvidia and AI developers like Microsoft and Meta fell this morning.

DeepSeek’s low-cost innovation could reshape how AI models are developed, challenging industry norms and igniting a global conversation about the accessibility of high-performance AI.