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The Artificial Intelligence (AI) Landscape Was Shaken This Week When a Chinese Start-up, DeepSeek, Unveiled a New Model in the Field That Seems to Rival the Capabilities of US Giants OpenAI and Google, But Doesn't Have as Powerful Hardware.
The Launch of the DeepSeek-R1 Model Sent Shockwaves Through Stock Markets on Monday, Especially Impacting the US Company Nvidia, a Key Player in the AI Chip Market, Which Is Currently the Third Most Valuable Listed Company in the World. Nvidia shares fell sharply on Monday (-17%, to $118.58), wiping more than half a trillion dollars from the company's market capitalization, or $560 billion, as investors reacted to the implications of the DeepSeek announcement. On Monday, the company's market capitalization was $2.90 trillion. This was not only the largest decline in the history of a company in the United States, but also more than twice the value lost by any other American company in a single day. A visualcapitalist.com analysis highlights the ten largest single-day market capitalization declines in recent years, and in eight of these cases it is Nvidia. Thus, if on January 27, 2025, Nvidia lost $560 billion from its market capitalization, on August 3, 2024, the same company lost $279 billion. In third place, with a decline of $251 billion on February 3, 2022, we find Meta (owner of Facebook, Instagram and Whatsapp), followed again by Nvidia, with a minus of $228 billion on January 7, 2025. Fifth place also belongs to this company, with a decline of $212 billion on April 19, 2024, followed by a decrease of $208 billion on June 24, 2024. Amazon lost $206 billion on April 29, 2022, and in the following positions we also find Nvidia, as follows: minus $205 billion on July 17, 2024; minus $205 billion on July 24, 2024; minus $197 billion on August 29, 2024.
Recall that Meta shares fell in early 2022 after Mark Zuckerberg announced his vision for the Facebook "metaverse". In the case of Amazon, in April 2022, the company reported its first quarterly loss in seven years.
After Monday's decline, Asian stock markets also fell yesterday, amid fears generated by the launch of the AI model by DeepSeek. In this context, shares of the Japanese electronics and semiconductor company Tokyo Electron Ltd. fell by 5.7%, to 24,325 yen, those of the manufacturer of automated testing equipment Advantest Corp. - by 11.1% to 8,162 yen.
European stock markets, however, followed a positive course yesterday, with the technology sector showing signs of recovery after Monday's decline. For example, shares of Siemens Energy AG, a German energy company that uses American Nvidia (AI) technology in its operations, rose 10% to 53.16 euros as of 15.08 local time.
US markets were volatile yesterday morning as Nvidia tried to recover from a major decline the previous day. Shares of Vistra Corp., a power and energy generation company and provider of AI infrastructure, rose 2.5% to $140.46 as of 09.52 local time.
Nvidia shares were up 0.2% to $118.67 as of 09.55, while Advanced Micro Devices Inc. (AMD) fell 1.4% to $113.44. Broadcom Inc., a provider of infrastructure software and semiconductors, was up 1.2% at $204.48 as of 9:57 a.m., while tech giant Apple Inc. was up 2.2% at $234.94.
• Why did DeepSeek send shockwaves through the markets?
According to visualcapitalist.com, concerns have arisen that future AI models could be developed more efficiently, potentially reducing demand for Nvidia's powerful GPUs and forcing a reassessment of the tech giants' massive investments in AI hardware.
The tech sector as a whole felt the shock, but so did other AI-related stocks, with the broader market falling significantly in Monday's trading session.
"There were immediate concerns that the launch of DeepSeek could disrupt the current AI business model, which relies on high-performance chips and high computing power, and consequently high energy consumption," Jefferies analysts say.
The development of DeepSeek has sparked a debate about the future of AI development, the role of hardware in driving AI progress, and the potential for unexpected challenges to the current dominance of American companies in what has been the hottest technology field in recent years.
The Chinese from DeepSeek say that they spent only a fraction of the money that large American companies allocate for the development of the R1 linguistic model.
It is worth noting that Nvidia was the biggest beneficiary of spending on Artificial Intelligence, the company designing the semiconductors used in this technology.
• The world's richest people lost $108 billion on Monday, after the stock market decline
The richest 500 people in the world, led by Jensen Huang, the co-founder of Nvidia, lost a combined $108 billion on Monday, amid the significant decline in technology company shares, in the context of the meteoric success of the AI assistant developed by the Chinese start-up DeepSeek, according to Bloomberg, Agerpres reports.
Billionaires whose fortunes are tied to artificial intelligence saw the biggest losses: Huang's fortune fell by $20.1 billion, a 20% decline, while Oracle Corp. co-founder Larry Ellison's $22.6 billion loss was bigger in absolute terms but only represented 12% of his fortune, according to the Bloomberg Billionaires Index. Dell Inc. chief Michael Dell lost $13 billion, and Binance Holdings Ltd. co-founder Changpeng Zhao lost $12.1 billion.
As a group, the tech titans lost $94 billion of their fortunes - about 85% of the total decline in the Bloomberg index. The Nasdaq Composite Index fell 3.07% on Monday.
On Friday, Meta CEO Mark Zuckerberg said the company he leads plans to spend $60 billion to $65 billion on AI-related projects this year, far exceeding Wall Street analysts' estimates. Big Tech's capital spending is expected to top $200 billion this year, according to Bloomberg Intelligence. Despite limited returns so far from tech companies' investments, their shares have hit record valuations on the stock market, generating historic gains for their owners. Nvidia has been the biggest winner of the AI boom so far, with Huang's net worth increasing nearly eightfold to $121 billion as of Friday. Zuckerberg's fortune has climbed 385% to $229 billion over the same period, and Amazon.com Inc.'s Jeff Bezos surged 133% to $254 billion.
While Huang and Ellison suffered significant losses on Monday, the fortunes of other tech billionaires were unaffected. Zuckerberg's net worth rose by $4.3 billion on Monday, as Meta shares rebounded, while Bezos' fortune rose by about $632 million.
AI DeepSeek announced on Monday that it was the target of a large-scale cyberattack, of the "malware" type, after it dethroned ChatGPT in downloads on the App Store, generating a decline in the American giants on the stock market, according to AFP. The company informed that, in this situation, it is temporarily limiting user registration.
• Trump announces an investment of up to 500 billion dollars in Artificial Intelligence
The new American President Donald Trump announced, last week, an investment of up to 500 billion dollars in the private sector to build an Artificial Intelligence (AI) infrastructure, according to the international press.
Artificial intelligence companies OpenAI, SoftBank and Oracle want to create a joint project, called "Stargate", which will start with an investment in a data center in Texas and will later expand to other states. Trump said: "Write down that name, "Stargate", because you will hear it a lot." The White House official said the investment would create hundreds of thousands of jobs and that investment in artificial intelligence must be sustained to face competition from China. Trump stressed: "We want this technology to stay in our country. China is a competitor and, in the future of technology, we want it to stay in the United States. China is a competitor, but there are others."
SoftBank and Oracle will initially invest $100 billion and allocate up to $500 billion for the "Stargate" project over the next four years.
• What is Deep Seek?
DeepSeek is a private Chinese company founded in July 2023 by Liang Wenfeng, a graduate of Zhejiang University, one of China's top universities, who funded the startup through his hedge fund, High-Flyer, according to MIT Technology Review. As of mid-year last year, the fund managed assets of about eight billion dollars, according to the Financial Times.
Liang, who previously focused on applying AI to investments, had bought a "stock of Nvidia A100 chips" - technology for which exports are now banned from China, which became the basis of DeepSeek, according to MIT Technology Review, writes CBS News.
It is not clear how much High-Flyer invested in DeepSeek, but the fund has an office located in the same building as DeepSeek and also holds patents related to the chips used to train AI models, according to Chinese corporate filings, according to Reuters.
Ben Reitzes, head of technology research at Melius, wrote in a note to clients that DeepSeek brings advances as an AI tool, including better learning and more efficient use of memory, but expressed skepticism about "the amount of chips used," according to CBS News.
According to analysts Bernstein, DeepSeek's total training costs for its V3 model are unknown, but in their opinion they would be much higher than the $5.6 million the startup has been talking about investing in computing power, Reuters writes. (A.I.)
• Why did Nvidia and other AI-related companies fall?
The Deep Seek fallout caused Nvidia's biggest single-day market cap loss in history, about $600 billion, or a 17% decline, as it rippled across the entire U.S. stock market.
"The concerns are that [Deep Seek] could bring massive changes to the current AI business model, which relies on high-end chips and massive computing power - and therefore energy," Jefferies analysts wrote in a note to clients, according to Bloomberg.
Analysts at Cantor wrote in a report that the launch of the latest DeepSeek technology has caused "great anxiety about the impact on demand for computing power and, consequently, concerns about GPU spending," according to CNBC.
DeepSeek is already at the top of Apple Inc.'s App Store rankings at a time when AI is being heavily spent, so the emergence of lower-cost alternatives like DeepSeek raises concerns about whether companies investing billions in AI development can justify their spending and ultimately turn a profit.
The "DeepSeek event" also has a broader geopolitical dimension because, despite U.S. bans on exports of advanced semiconductor technologies to China, the startup's progress suggests that Chinese engineers have found ways to innovate with limited resources, according to CNBC. "DeepSeek's success underscores a potential shift in the AI race, where efficiency trumps access to cutting-edge hardware," Cantor analysts observed, according to CNBC. (A.I.)
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