DeepSeek Shakes the AI Landscape: Nvidia Shares Plunge Amidst Rising Chinese Competition

Nvidia shares plummeted over 16% following the rapid rise of DeepSeek, a Chinese AI chatbot that has quickly become the most downloaded free app in the US, creating uncertainty in global tech markets. Developed at a fraction of the cost compared to Western counterparts, DeepSeek uses the open source DeepSeek-V3 model, which reportedly cost around $6 million to train, raising concerns over the viability of investments made by US tech firms in AI infrastructure.

The emergence of DeepSeek has triggered drops in stock prices for major tech companies, including Nvidia, Microsoft, and Google, as investors question the implications of a low-cost Chinese competitor. Silicon Valley venture capitalist Marc Andreessen noted this situation as reminiscent of the ‘Sputnik moment’ when the US was taken by surprise by Soviet technological advancements.

With serious implications for the AI sector, including a potential disruption of the entire AI supply chain, the development has sparked discussions about the future of AI dominance in the US. However, analysts at Citi suggest that while DeepSeek presents a formidable challenge, Chinese companies may still encounter difficulties in a restrictive environment. Additionally, DeepSeek has temporarily limited user registrations due to a cyberattack, further complicating its rapid ascent.

Founded by Liang Wenfeng in Hangzhou in 2023, DeepSeek’s development was bolstered by a significant stockpile of Nvidia A100 chips, creating a new paradigm in AI development that could significantly lower operational costs and alter market dynamics.