The startup has said its models either match or outperform rivals at a fraction of the cost, challenging the view that AI requires vast investment.

SINGAPORE—The unexpected success of Chinese AI startup DeepSeek has revealed cracks in U.S. efforts to contain China’s technology ambitions, challenging both Washington and Silicon Valley to rethink how best to preserve American supremacy.

The start-up had become a key player in the “Chinese Large-Model Technology Avengers Team” that would counter US AI dominance, said another. China’s delight, however, spelled pain for several giant US technology companies as investors questioned whether DeepSeek’s breakthrough undermined the case for their colossal spending on AI infrastructure.

The artificial intelligence boom is a two-edged sword for $290 billion ASML . Shares in the Dutch maker of lithograph machines used to make chips soared by 8% on Wednesday thanks to booming demand from semiconductor manufacturers such as TSMC .

ASML Holding NV’s orders in the fourth quarter beat estimates as the artificial intelligence boom drove demand for its chipmaking machines, potentially easing concerns sparked by Chinese startup DeepSeek.

Dutch semiconductor equipment maker ASML on Wednesday reported better-than-expected net sales and profit results for the fourth quarter.