DeepSeek has triggered major troubles for the Nvidia-led American AI dominance. The emergence of DeepSeek, a Chinese AI startup, has raised concerns among investors about the future competitiveness of U.S. tech companies. DeepSeek's rapid development of a large language model, comparable to OpenAI's ChatGPT, was achieved at a fraction of the typical cost. This breakthrough has led to sharp declines in U.S. stock index futures, with the Nasdaq 100 dropping 2% in Asia-Pacific trading. Investors are particularly worried about the implications of this low-cost AI model for the U.S. tech sector.
Nvidia's Stock Performance, plunge unprecedented
Nvidia, a leading supplier of AI hardware, has been significantly impacted by DeepSeek's advancements. The company's stock plummeted by nearly 12%, resulting in a market value loss exceeding $400 billion—the largest single-day value destruction in stock market history. This decline reflects investor concerns about the sustainability of Nvidia's business model, which relies heavily on selling high-end AI chips.
“DeepSeek’s low-cost model is a direct challenge to the value Nvidia provides,” said Clara Zhang, an AI industry analyst. “If competitors can build advanced AI systems on cheaper hardware, Nvidia’s dominance in the market could be at serious risk.”
About DeepSeek and its recent disruption in the tech sector
DeepSeek is a Chinese artificial intelligence company specializing in the development of open-source large language models. Founded in 2023 by Liang Wenfeng, who also leads the hedge fund High-Flyer, DeepSeek has rapidly gained attention for its cost-effective AI solutions. In May 2024, the company released DeepSeek-V2, which outperformed many existing models and intensified competition among AI developers. DeepSeek's focus on research and open-source development has positioned it as a significant player in the AI industry.
The Nasdaq effect:
The Nasdaq Composite, known for its tech-heavy portfolio, fell by 2% in early Asia-Pacific trading hours following the announcement of DeepSeek’s breakthrough. Investors are grappling with the implications of a Chinese firm producing competitive AI technologies at a significantly lower cost.
Here is our previous piece on DeepSeek: https://vygrnews.com/tech/china-s-deepseek-is-giving-solid-competition-to-openai-with-50-000-nvidia-h100-ai-gpus
DeepSeek’s latest AI model, the DeepSeek-V2, has been praised for its innovation and efficiency. However, its emergence has fueled concerns about the U.S.'s dominance in the AI sector, especially given geopolitical tensions between the U.S. and China. Investors fear the shift could alter the global AI landscape, potentially diverting market leadership and profitability away from American companies.
Some market analysts believe that while the short-term market reaction may appear dramatic, it could lead to greater diversification in the AI industry. “Competition from companies like DeepSeek can spur innovation and reduce monopolistic tendencies in the AI market,” noted Jonathan Mayers, a Wall Street economist.
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