Microsoft (MSFT) stock fell on Monday along with other major US tech companies following the arrival of DeepSeek AI. Stocks heavily tied to the AI market took a hit after Chinese artificial intelligence startup DeepSeek released its new large language model DeepSeek-R1. Through strategic development, this startup has pioneered OpenAI-level model quality while slashing traditional costs.
Across multiple sectors, DeepSeek AI’s developments have AI stock investors reconsidering market expectations. Microsoft has high hopes in 2025 of being a top choice for investors due to their work in AI. However, the new competition in town has the markets in a frenzy. There is a widespread fear that DeepSeek could challenge the United States’ dominance within the emerging industry. The capabilities of the new free, open-source, large language model have made waves since its December launch. Now, it’s even competing with Microsoft and Nvidia on the markets, negatively affecting the latter two’s prices.
Microsoft CEO Satya Nadella recently praised DeepSeek’s efforts, calling the new model “super impressive” for its open-source design, efficient inference-time computing, and high compute efficiency. “We should take the developments out of China very, very seriously,” he added. Microsoft’s shares are somewhat volatile and have had 12 moves greater than 2.5% over the last year. In that context, today’s dip indicates the market considers this news pretty important for shares, but not completely detrimental.
Despite its recent fall, Microsoft stock (MSFT) still expects to perform well in 2025 thanks to its AI moves. Analysts from several institutions, including Morgan Stanley, are bullish on MSFT shares, with Morgan Stanley recently saying the stock is in a “pole position.” Its recent $80B investments in AI development could help the company’s stock value boom in 2025, according to experts.
For now, Microsoft is riding an overall tech dip with the arrival of DeepSeek. Market volatility impact is intensifying as various investors rush toward Chinese stocks. Its presence has thrown a wrench in plans just a week after US President Donald Trump said the country would be the “world capital” in AI. Furthermore, its cheap development compared to major AI players in the US has investors excited. Thus, Nvidia, Microsoft, and other top AI stocks may see this dip continue for some time. At press time, MSFT is trading under $430, down as much as 15 points today.