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Chinese AI Firm DeepSeek Deep-Sixes US Tech Stocks | PYMNTS.com

Jan 27, 2025 - pymnts.com
Tech stocks experienced a significant decline on Monday, January 27, following the release of a new AI model by China’s DeepSeek. The model has raised concerns about the U.S.'s ability to maintain its leadership in AI, as it reportedly matches the performance of models from U.S. companies like OpenAI and Meta while using fewer Nvidia chips. This development led to a substantial market impact, with Nvidia poised to lose over $300 billion in market value. The news also affected other tech companies, including Microsoft and Meta, and even extended to firms outside the tech sector, such as Siemens Energy, which saw a 22% drop. Investors are now questioning the future need for AI hardware investments.

The AI landscape in the U.S. is undergoing changes, with President Donald Trump recently repealing Joe Biden’s 2023 AI regulations, signaling a shift towards a more pro-growth and pro-innovation policy. Meanwhile, OpenAI, SoftBank, and Oracle have announced a $500 billion investment in AI infrastructure over the next four years, highlighting the ongoing commitment to AI development despite the market volatility. The situation underscores the vulnerability of the AI sector, as noted by Luca Paolini of Pictet Asset Management, who emphasized the risks associated with consensus trades based on assumed leadership.

Key takeaways:

  • DeepSeek's new AI model has caused a significant drop in tech stocks, particularly impacting Nvidia, Microsoft, and Meta, as it challenges the U.S.'s AI leadership by using fewer Nvidia chips.
  • The AI model has quickly become the most popular free app on the Apple App Store, surpassing OpenAI's ChatGPT.
  • There is uncertainty about future AI hardware investments, with investors questioning the necessity of current spending projections.
  • President Donald Trump has repealed Joe Biden's 2023 AI regulations, signaling a shift towards a more pro-growth and pro-innovation AI policy in the U.S.
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