Nebius Group N.V. NBIS shares traded lower on Monday amid weakness in artificial intelligence (AI) stocks due to concerns over competition from Chinese startup DeepSeek’s new AI model.

The Details: DeepSeek’s R1 AI model, developed for less than $6 million, reportedly has similar capabilities similar to OpenAI's ChatGPT. In fact, in many third-party performance tests, DeepSeek’s reasoning model has beaten OpenAI.

Furthermore, the Chinese startup claims it used about 50,000 Nvidia H100 GPUs, which has potentially caused investors to question the significant GPU investments that many American technology companies have made.

“The new model is cost-effective and runs on reduced-capability chips,” Saxo analysts said. “The development raises questions about the high valuations of leading AI companies like Nvidia and the investment case for the entire AI supply chain.”

What Else: Last week, Nebius introduced multiple text-to-image generation AI models to its Nebius AI Studio. The new text-to-image models include Flux Schnell, Flux Dev and SDXL, which aim to offer consumers a more cost-effective, scalable solution for high-quality image generation.

“We are excited to make image generation models accessible to AI creators everywhere, contributing to a new wave of creativity and playing a key role in the AI revolution that is transforming businesses and boosting creative industries,” said Roman Chernin, co-founder and chief business officer at Nebius.

“In the future, we plan to expand further by adding video models, increasing possibilities for dynamic content creation across industries,” Chernin added.

NBIS Price Action: Nebius stock closed Monday 37.44% lower at $26.08, according to data from Benzinga Pro.

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Image: This illustration was generated using artificial intelligence via Midjourney.