DeepSeek AI: Chinese startup DeepSeek has taken a beating in the global AI race, and its untested performance has raised serious questions about whether US companies can maintain their lead, as the landscape is changing beneath their feet.
Last night’s trading session on Wall Street rocked tech and AI companies, with speculators struggling to gauge the damage.
Major AI chipmaker Nvidia saw its advertising price drop sharply, while shares of tech giants like Microsoft, Microsoft, and Dell also fell sharply.
This shift was not limited to Wall Street; AI stocks around the world felt its impact, all thanks to the buzz around a Chinese startup called DeepSeek and its AI models, the DeepSeek-R1 and DeepSeek-V3.
DeepSeek shook up the global tech scene with its low-cost AI chatbot. Its launch in the US is a real challenge to industry-leading AI models, given that it does so at a fraction of the cost.
The Chinese startup’s impact hit Wall Street hard during overnight trading. The Nasdaq Composite fell 3.07%, while the S&P 500 dropped about 1.5%.
Tech giants led the decline, with Nvidia shares dropping nearly 17% to a close of $118.58. That was a staggering market-cap loss of $593 billion in one day — more than double its previous record.
Losses actually widened, with Philadelphia Semiconductor filing down 9.2%, its biggest drop since March 2020, with chipmakers bearing the brunt of massive selling pressure.
DeepSeek’s ‘Sputnik Moment’
DeepSeek’s win has forced people to question the value of industry pioneers like OpenAI. Silicon Valley waning capitalist Marc Andreessen didn’t mince words, calling DeepSeek’s R1 show AI has a “Sputnik moment.”
The comparison fits right on a home run — just as the Soviet Union’s Sputnik launch kicked off the space race in the 1950s, DeepSeek’s win could reshape the AI landscape.
The startup’s secret sauce? Afforded efficiency. DeepSeek claims its AI companion requires less information than competitors like OpenAI’s ChatGPT. It runs on 2,000 Nvidia H800 chips, making it cheaper to run. Better in fact, the company says its untested DeepSeek-R1 costs 20-50 times less than OpenAI’s offerings.
It’s worth noting that as of Monday, DeepSeek’s app surpassed ChatGPT in terms of downloads on Apple’s App Store.
In addition, the need for a Mu chip surprises people for another reason: it seems to help China circumvent US trade restrictions to slow its AI development.
Wide advertising repercussions
The misfortunes were not limited to Nvidia. Other tech giants like Microsoft, the letter set and Dell Innovations also suffered real losses.
Shares of semiconductor giant Broadcom fell 17.4%, while AI-focused foundation companies like Advanced Realty and Vertiv Property also suffered.
The offering spree also spread overseas, with Japan’s SoftBank and Europe’s ASML being the biggest losers.
How did NVIDIA, OPENAI respond?
After seeing its stock price fall, Nvidia acknowledged DeepSeek’s achievement but stood by its word, saying its chips are still crucial for AI development.
The chipmaker noted that DeepSeek’s growing customer base will still require a lot of preparation control, which it said high-performance Nvidia GPUs can provide.
DeepSeek’s AI show was also praised by OpenAI CEO Sam Altman. He called the Chinese startup’s R1 AI show impressive.
“DeepSeek’s R1 is an amazing demonstration, especially in terms of what they can provide at this price point,” Altman said on X.
What’s more? DeepSeek’s entry has forced investors to re-evaluate the AI-fueled demand for chips, information centers and control foundations that has driven markets to record highs over the past two decades. Brian Jacobson, chief financial analyst at Ed Riches Administration, told Reuters it could overturn “the entire AI narrative.”
Dr. VK Vijayakumar, chief investment strategist at Geojit Financial Administration, put it succinctly: “DeepSeek’s impact on the US stock market, especially tech stocks, is a reality check for a highly respected market.”
“It is likely to have a real impact on all markets,” he added.
Some experts see opportunity in the chaos. Daniel Morgan of Synovus Believe Company told Reuters that Nvidia and other chipmakers remain confined to information centers, where the “real cash” in AI lies.
And some have actually called the correction in US stocks explosive. Subho Maulik, author and CEO of Appreciate, said, “The market’s ‘shoot first, ask questions later’ reaction to DeepSeek’s AI chatbot is another update of the AI industry’s hasty trend. Beyond any doubt, DeepSeek’s sudden development is a ‘Sputnik-like moment’ for the US and possibly the pinnacle of American AI exceptionalism.”
