Chinese startup DeepSeek upends the AI market and shakes Nvidia shares

On Monday, January 27, DeepSeek, a Chinese startup specializing in artificial intelligence (AI), caused significant fluctuations in global stock markets. According to Bloomberg, DeepSeek’s latest developments have challenged the US leadership in the technology sector, demonstrating that creating powerful AI models can be much cheaper.

How DeepSeek managed to get ahead of Nvidia

The discussion focused on the new DeepSeek R1 model, which runs on less advanced chips but proved to be more cost-effective. This raised questions about the sky-high valuations of companies such as Nvidia Corp. which is considered to be the leading supplier of AI chips.

“DeepSeek demonstrates that powerful AI models can be built at a much lower cost,” said Wei-Sern Ling, managing director of Union Bancaire Privee. – “This could undermine the investment attractiveness of AI supply chains built on the high costs of a limited number of hyperscalers.”

Market reaction

• Nasdaq 100: futures fell by 2.5%.
• S&P 500: contracts fell by 1.4%.
  
• Chinese AI stocks: reacted positively – shares of Merit Interactive Co. reached a daily high.
• Hong Kong’s Hang Seng Tech Index: up 2%.

The most affected are:

• Nvidia: shares fell by 3%.
• Advantest (Nvidia supplier): down 8.6% in Tokyo.
  
• Mapletree Industrial Trust: losses of 3.6% in Singapore.

Why is DeepSeek a breakthrough technology?

The DeepSeek R1 model was developed in just two months with a total budget of $6 million. It has already outperformed the latest OpenAI model (o1) in independent tests and demonstrates a high level of transparency and efficiency.

Investor Marc Andreessen called the model “one of the most impressive breakthroughs,” noting its ability to generate answers to queries with a human level of thinking.

At the time of publication, DeepSeek R1 is topping the rankings in the Apple App Store, receiving positive user reviews.

Context: global implications

DeepSeek’s breakthrough is potentially a game changer for the AI industry. For the first time, it has been proven that the cost of development does not always equal its quality. This may force market leaders such as Nvidia to reconsider their strategies and pricing.

The Chinese model is also seen as a competitor for the latest offerings from OpenAI and Meta Platforms, which further exacerbates the technological rivalry between the US and China.

DeepSeek has shown with its R1 model that affordable AI is not just a theory but a reality. New developments of the company can significantly influence the way artificial intelligence technologies will be created and used in the world.