The emergence of Deep Seek, a Chinese AI company, has caused a massive shake-up in the global tech industry, wiping out hundreds of billions of dollars in market value from U.S. tech giants in a single day. Among the companies most affected was Nvidia, which had recently become the world’s largest company by market valuation, reaching a staggering $3.5 trillion. However, on Monday, Nvidia experienced a historic $100 billion loss in market value, with its shares plummeting by 17%. This marks the largest single-day loss for Nvidia, even surpassing its previous record of a $79 billion drop in September last year.
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The root of this disruption lies in the release of Deep Seek’s latest AI model, R1, which has drawn comparisons to OpenAI’s ChatGPT. The Chinese company’s AI tool has been praised for its high performance, innovative features, and affordable cost. These advantages quickly captured the attention of the tech community, resulting in an overwhelming number of users registering to try the product. However, this surge in demand caused technical issues for Deep Seek, including a reported cyberattack, which forced the company to limit registrations temporarily.
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Impact on the U.S. Tech Industry
Deep Seek’s innovation has sent shockwaves through Silicon Valley and raised concerns about the dominance of U.S. tech giants in AI. For years, it was believed that AI leadership required massive financial resources and access to the most advanced hardware. Nvidia, for instance, has been a major supplier of cutting-edge chips like the H100 and H800, which are essential for running advanced AI models. Despite export restrictions imposed by the U.S. government under President Biden, which limit China’s access to Nvidia’s most advanced chips, Deep Seek achieved remarkable results by using the slightly less advanced H800 chip.
This achievement challenges the notion that innovation depends on access to the most sophisticated tools and substantial financial investment. Deep Seek has proven that cost-effective solutions can disrupt even the most dominant players in the industry. As a result, major U.S. tech companies that rely on Nvidia’s GPUs—such as those producing graphics processing units for AI applications—saw their shares tumble. The broader stock market also reacted negatively, with indices tracking tech companies reporting sharp declines.
Broader Global Consequences
The fallout from Deep Seek’s success extended beyond the U.S., affecting global markets. European chipmaker ASML saw its stock drop by 7%, while Japan’s SoftBank, a major investor in AI-related industries, suffered an 8% decline. Similarly, energy firms and other industries with significant investments in AI experienced notable losses. The ripple effects illustrate the interconnectedness of the global tech ecosystem and its vulnerability to breakthroughs in the competitive AI landscape.
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Questions Raised by Deep Seek’s Success
Deep Seek’s rapid rise has sparked a range of critical questions about the sustainability of the current AI race. One pressing issue is whether the U.S. strategy of pouring billions of dollars into AI development is financially sustainable. Companies like Nvidia, with market valuations exceeding $3 trillion, have faced scrutiny over whether such high valuations are justified in the face of emerging competition. The success of Deep Seek, achieved with a fraction of the resources invested by U.S. tech giants, challenges the assumption that AI dominance depends solely on massive capital.
Another significant question concerns the effectiveness of U.S. sanctions aimed at limiting China’s technological advancements. Despite restrictions on access to advanced hardware, Deep Seek’s achievements demonstrate that China can still make significant strides in AI innovation. This development underscores the need for a reassessment of strategies in the ongoing U.S.-China competition for AI supremacy.
Comparisons to Historical Moments
The impact of Deep Seek’s breakthrough has been likened to historical moments of technological disruption. Former U.S. President Donald Trump referred to this development as a “wake-up call” for Silicon Valley and the entire U.S. tech industry. He compared it to the Soviet Union’s launch of Sputnik in 1957, which spurred the United States to accelerate its efforts in the space race. Trump emphasized that this setback could be an opportunity for U.S. companies to innovate more efficiently, reducing their reliance on large-scale investments.
In response to the growing competition, Trump’s administration recently launched a $500 billion project called Stargate, aimed at bolstering America’s AI capabilities. This initiative has seen investments from major players like Oracle, SoftBank, and OpenAI. However, Deep Seek’s success raises doubts about whether such massive investments are necessary for fostering innovation. The ability of a relatively small Chinese company to disrupt the industry with limited resources challenges the prevailing mindset in Silicon Valley.
The Future of AI Competition
Deep Seek’s achievements represent a turning point in the global AI race, highlighting the potential for smaller, resource-efficient innovations to compete with established tech giants. As users continue to embrace Deep Seek’s technology, some experts predict that it could become a viable alternative to ChatGPT, further intensifying competition between the U.S. and China.
The rise of Deep Seek also signals a broader shift in the AI industry, where cost-effectiveness and creativity may become more important than access to massive financial resources. This development has reshaped the narrative around AI dominance, prompting policymakers, investors, and tech leaders to reconsider their strategies in the face of new and unexpected challenges.
In conclusion, the story of Deep Seek demonstrates that innovation knows no boundaries. Its success has disrupted the global tech industry, raised important questions about the future of AI, and set the stage for a more competitive and dynamic landscape in the years to come.
FAQs
What is DeepSeek AI?
DeepSeek is a Chinese artificial intelligence company that develops open-source large language models (LLM). Based in Hangzhou, Zhejiang, it is owned and solely funded by Chinese hedge fund High-Flyer, whose co-founder, Liang Wenfeng, established the company in 2023 and serves as its CEO.
The DeepSeek-R1 model provides responses comparable to other contemporary LLMs, such as OpenAI’s GPT-4o and O1, despite being trained at a significantly lower cost—stated at US$6 million compared to $100 million for OpenAI’s GPT-4 in 2023—and requiring a tenth of the computing power of a comparable LLM. DeepSeek’s A.I. models were developed amid United States sanctions on China for Nvidia chips, which were intended to restrict the country’s ability to develop advanced A.I. systems.
Deepseek and chatgpt
DeepSeek is technically better than ChatGPT if you look at some obscure AI benchmarks. DeepSeek responds faster in technical and niche tasks, while ChatGPT provides better accuracy in handling complex and nuanced queries. DeepSeek offers faster responses and lower costs, while ChatGPT excels in creativity and versatility.
Who invested in DeepSeek?
Who founded DeepSeek? The company was founded in 2023 by Liang Wenfeng in Hangzhou, a city in southeastern China. The 40-year-old, an information and electronic engineering graduate, also founded the hedge fund that backed DeepSeek.
Can I invest in DeepSeek?
You can’t currently invest in DeepSeek because it’s a privately held company owned by Chinese hedge fund High-Flyer.
What is DeepSeek stock price today?
The live price of DeepSeek AI is $<0.000001 per (DEEPSEEK / USD) with a current market cap of $0 USD. 24-hour trading volume is $3.31M USD.
What did Nvidia say about DeepSeek?
“DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling,” an Nvidia spokesperson said Monday in a statement
Does DeepSeek use a Nvidia GPU?
DeepSeek claims to have pre-trained its V3 model on only 2,048 Nvidia H800 GPUs over a two-month period, with each chip costing about US$2 per hour to run.
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