Chinese DeepSeek emerged as an unexpected disaster in the stock market on Monday, January 27, 2025 tech world faced an unpredicted market uproar as DeepSeek’s effective AI model. It covered a massive sale of, nearly $1 trillion from the U.S. and European tech sectors.
Nvidia a leading chipmaker company in the U.S. has experienced a record-breaking loss in market value. The loss was $465 billion a huge drop in the U.S. stock market history.
DeepSeek AI assistant model became the no-one-downloaded free app on the Apple store. It pushed the interest towards ChatGPT competition. The most worrying part for a few U.S. experts is how the Chinese start-ups ended up leading American companies at very low costs.
If it’s true, the question arises as to why U.S. companies say they plan to spend money on data centers and computer chips to support AI developments.
There’s a lot of confusion about technological advancements with the hype of DeepSake.
Deepseek’s rise is incredibly rapid as 18 months ago, when a company managed to develop competitive models like OpenAi and Gemini. But this is cost-effective and industry experts and investors are thinking if spending money on AI development is adding value to high stock can be the best way forward.
DeepSeek: China’s AI Breakthrough Amid Chip Ban
The startup of deepSeek was founded in 2023. A year later China released its First AI language model. Liang Wenfeng founded China’s High-Flyer hedge fund before becoming CEO at Huarui-Investments to lead its AI-driven quantitative trading operations.
The fund gathered with 10,000 high-performance graphics processors of A100 and the chips were from Nvidia. This company was based in California. The chips were built to run AI systems. This information was shared on WeChat a Chinese social media platform. After that, the U.S. stopped selling chips to China.
Deepseek is a recent model built with Nvidia’s lower-performing H800 chips, which were not banned in China. A message from China is that high-performing hardware is not necessary for cutting-edge AI research.
A follow-up research paper was published last week on the same day as President Donald Trump’s inauguration. The paper caused the buzz. That paper was about another DeepSeek AI model called R1 that with advanced “reasoning” skills such as the ability to rethink its approach to solving a problem, is significantly cheaper than a similar model sold by OpenAI called o1.
Rasgon said, “What their economics look like, I have no idea,”. “But I think the price points freaked people out.”
Tech Stocks Drop
The challenge is clear for Nvidia. it must adapt to a market where cost-effective AI solutions are gaining priority and dominance. However, the knock-on effects of DeepSeek’s ascent have made deep effects across the tech industry.
Global technology stocks lost around $1 trillion in value as investors reconsidered their high valuations after the wake of the Chinese startup’s debut. Analysts noted that the loss extends beyond Nvidia, showing a bigger shift in market expectations and companies that depend on AI technology.
Companies such as AMD and Intel, which compete with Nvidia in the AI hardware space, are likely to face similar scrutiny from investors. It questions whether high-cost infrastructure will remain the dominant trend.
What differs the DeepSeek?
One thing that draws a line in DeepSeek from its competitors such as OpenAI and artificial models is that they are “open source”. Its key components are free for anyone to access and modify, although the company hasn’t released the data it used for training.
what’s attracted the most admiration about DeepSeek’s R1 model is what Nvidia calls a “perfect example of Test Time Scaling”. When AI models efficiently show their process of thought, they can use that further without having to feed them for new data sources.
“It’s just thinking out loud, basically,” said Lennart Heim, a researcher at Rand Corp.
Starting with o1, OpenAI’s reasoning models do the same, and other U.S.-based competitors such as Google likely have similar capabilities that haven’t been released, Heim said.
But “it’s the first time that we see a Chinese company being that close within a short period. That’s why a lot of people pay attention to it,” Heim said. “I used to believe OpenAI was the leader, the king of the hill, and that nobody could catch up. Turns out this is not completely the case.”
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