Global technology shares took a hit as the emergence of a low-cost artificial intelligence (AI) model from Chinese startup DeepSeek raised concerns about the sector’s reliance on high-cost, high-tech chips. The fallout was especially evident in US tech giant NVIDIA, whose shares plummeted nearly 17% on Wall Street, wiping out almost US$600 billion in market value – the steepest one-day loss ever recorded for a company, according to LSEG data.
For the uninitiated, DeepSeek was founded in 2023 in Hangzhou, and launched its first large language model the same year. Last week, it unveiled a free AI assistant that has disrupted the market with its efficiency and affordability, requiring significantly less data and costing a fraction of what competitors invest. DeepSeek’s app quickly overtook OpenAI’s ChatGPT as the top-rated free app on Apple’s US App Store.
The new assistant is powered by DeepSeek-V3, a model that the company claims “leads the leaderboard among open-source models and rivals the most advanced closed-source systems globally.” Remarkably, the startup reported spending only US$5.6 million to develop its model – a stark contrast to the billions invested by major US tech firms.
DeepSeek has also recently introduced Janus Pro 7B, an open-source vision-based AI model accessible on platforms like Hugging Face and GitHub. This model reportedly surpasses OpenAI’s DALL-E and Stable Diffusion in both image generation and analysis capabilities.
NVIDIA, in response to the stock market reaction, sought to reassure investors by emphasizing that growing demand for DeepSeek’s services would drive increased reliance on NVIDIA’s technology in the Chinese market. “DeepSeek’s advances demonstrate how new AI models can be created using techniques that leverage widely available resources and are fully compliant with export controls,” the company said.
Meanwhile, OpenAI CEO Sam Altman commended DeepSeek’s R1 model, likened to a counterpart to his company’s own o1 model. Despite the emergence of a new competitor, Altman expressed optimism, stating, “We remain committed to executing on our research roadmap and believe that increased compute is now more important than ever to succeed in our mission.”
The rapid emergence of DeepSeek has sparked debate over the sustainability of AI investments by US tech companies. US President Donald Trump described the company’s breakthrough as a “wake-up call” for Silicon Valley, urging American firms to focus on maintaining a competitive edge. He also argued that this recent development could be a “positive” for US tech giants, suggesting that they could “come up with hopefully the same solution” by spending less instead of pouring billions of dollars.
