China’s DeepSeek has shaken up the AI industry with its open-source model. The company claims its AI can match the abilities of cutting-edge chatbots while using a fraction of the computer chips that leading AI companies rely on. This has prompted investors to rethink the high valuations of companies like Nvidia, whose equipment powers the most advanced AI systems.
It has also raised questions about the enormous investments being made by companies like Alphabet, Meta, and OpenAI. On Monday, the S&P 500 index fell 1.5 percent and the tech-heavy Nasdaq dropped 3.1 percent. Nvidia was hit hard, plunging 16.9 percent and losing roughly $600 billion in market value.
Falling tech stocks also dented market indexes in Europe and Japan. The pain was concentrated at companies at the forefront of the AI boom, including multitrillion-dollar behemoths that have driven U.S. markets since the 1990s. Alphabet and Microsoft fell, and other chipmakers like Arm, Broadcom, and Micron slid sharply.
deepSeek’s impact on AI investments
DeepSeek’s app is now the top free app in the Apple App Store, pushing OpenAI’s ChatGPT into second place. The open-source model, first released in December, has reportedly taken only two months and less than $6 million to develop.
This is significantly lower than the hundreds of billions of dollars that American tech giants have invested in developing their own models. Nvidia acknowledged DeepSeek’s advancements in a statement, calling them an “excellent AI advancement” that leverages “widely available models and compute that is fully export control compliant.”
Microsoft CEO Satya Nadella remarked that DeepSeek’s advances appeared to be “super impressive … and super-compute efficient.” He added, “We should take the developments out of China very, very seriously.”
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John Moolenaar, R-Mich., chairman of the Select Committee on China, emphasized, “The U.S. cannot allow CCP models such as DeepSeek to risk our national security and leverage our technology to advance their AI ambitions. We must work to swiftly place stronger export controls on technologies critical to DeepSeek’s AI infrastructure.”
Not everyone is convinced by DeepSeek’s claims. Bernstein analyst Stacy Rasgon expressed skepticism, stating, “We believe that DeepSeek did not ‘build OpenAI for $5M.’ The models look fantastic, but we don’t think they are miracles.”
This shakeup has raised questions about the future of the AI industry and whether U.S. tech giants can maintain their leading positions amid growing global competition.
As DeepSeek continues to disrupt the AI landscape, it compels the industry to rethink competitiveness and success.