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Why DeepSeek Sent Nvidia, Other Tech Stocks Tumbling

Jan 28, 2025 - financialpost.com
The article discusses the impact of the Chinese AI company DeepSeek on global tech markets, particularly in the United States. DeepSeek's AI chatbot quickly rose to the top of US app stores, causing significant declines in US tech stocks, including a 17% drop in Nvidia's stock. The company's ability to develop a competitive AI model at a fraction of the cost of its US counterparts, spending only $5.6 million compared to billions, has raised questions about the strategies and valuations of American tech firms. DeepSeek's open-source model and efficient architecture, which bypasses the need for expensive chips, have challenged the US's dominance in AI and prompted discussions on innovation and cost-efficiency in the industry.

The emergence of DeepSeek has sparked a debate on the sustainability of high spending in AI development and the potential need for US companies to adopt more cost-effective strategies. The US government's efforts to restrict AI technology exports to China have been undermined by DeepSeek's success, highlighting a gap in the US's approach to maintaining its competitive edge. The article suggests that DeepSeek's rise could either threaten US dominance or drive innovation and efficiency in the AI sector. The reaction from market experts and tech leaders indicates a mix of concern and recognition of the potential for increased competition and innovation in the AI industry.

Key takeaways:

  • DeepSeek, a Chinese AI company, has disrupted global markets by developing a competitive AI model at a fraction of the cost of its US counterparts.
  • The rise of DeepSeek led to significant losses in US tech stocks, with Nvidia experiencing a 17% drop in stock value.
  • DeepSeek's AI model is open source and reportedly cost only $5.6 million to train, challenging the high-cost strategies of US tech giants.
  • The emergence of DeepSeek raises questions about US dominance in AI and could pressure American companies to innovate and reduce costs.
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