NVIDIA shares fall as Chinese competitor unveils new AI chatbot
Chinese AI startup DeepSeek stormed past America’s best to reach the top of Apple’s App Store, prompting a tech stock selloff.
What does this mean?
America’s chip export ban was designed to keep the best semiconductors out of Chinese factories – a strategy the US hoped would protect its lead in the AI race. But it looks like the US will need to do more than that to maintain its dominance.
Despite being stuck with second-rate chips, DeepSeek has still managed to make a large language model that can compete with US ones – and for a fraction of the price. The lab spent just $5.6 million training that ‘V3’ model – a vastly smaller sum compared to the billions that some US equivalents have spent. Plus, DeepSeek has an advanced reasoning ‘R1’ version too, which it says can rival OpenAI’s best.
Come February, other firms will be able to use DeepSeek’s V3 to build their own AI services – at less than a tenth of the cost of using US-based Anthropic’s Claude. That, at a time when more and more businesses are welcoming the tech: the number of Chinese companies using AI now tops 10%, up from 8% six months ago. And with DeepSeek offering cutting-edge tools at a sale-season price, even the most popular AI service providers may need to offer cheaper plans if they want to keep their customers.
DeepSeek’s bootstrapped strategy and open-source approach are lowering the drawbridge for smaller players, threatening Big Tech’s monopoly. Other emerging nations like India may also find it easier to align with China’s tech ecosystems. Investors already seem less sure of their positions, and global tech stocks went down sharply on Monday.
What happened to NVIDIA shares?
Nvidia took a hit after DeepSeek launched their budget-friendly AI model, wiping $465 billion off NVIDIA’s market value and challenging US tech dominance. That’s the biggest single-day market loss cap in history – here are the others.
What does this mean?
DeepSeek’s new AI model, which competes with US technology using less data, has stirred up AI-centric industries like data centers and cable manufacturers. This shake-up has influenced the tech sector, with firms like ASML and Advantest seeing significant market value declines.
Meanwhile, cloud-computing giant SAP beat earnings expectations and forecasts faster cloud growth despite uncertainty about AI’s impact. The tech industry is preparing for possible shifts in AI spending strategies driven by DeepSeek’s competitive pricing.
DeepSeek’s cost-effective AI model isn’t just a technological breakthrough – it’s influencing market dynamics, especially in data infrastructure-heavy sectors. The global tech landscape is shifting as Chinese innovation starts to match US capabilities, prompting reevaluations of the future of leading tech firms.
This could lead to alterations in global investment strategies as countries and companies reconsider their tech dependencies and partnerships.
Original content is sourced from Finimize.com and was first published on 27 and 28 January 2025.
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