A young Chinese artificial intelligence startup DeepSeek has sparked a massive rout Shares of U.S. technology stocks rose on Monday as their highly competitive and potentially shockingly cost-effective model raised questions about the hundreds of billions of dollars the country’s largest companies are spending on artificial intelligence.
The emergence of DeepSeek is shaking investor confidence in the artificial intelligence story that has boosted U.S. bull markets over the past two years. This raises doubts Hype surrounding Nvidia chips And spread all the way to the entire market, impacting stocks power producer They will get a boost from demand for artificial intelligence data centers.
Here’s how the DeepSeek-induced selloff on Wall Street unfolded:
new reasoning model
DeepSeek was founded in May 2023 by Liang Wenfeng, whose artificial intelligence hedge fund partially funded the company. In late December, AI developers launched free, open-source large language models explain It took just two months to develop and cost less than $6 million to build.
On January 20, DeepSeek, based in Hangzhou, China, released the R1 inference model, which outperformed Open AI’s latest o1 in multiple third-party tests.
DeepSeek is looking to differentiate itself from competitors through its inference capabilities, which means the model first generates a “Thought Chain” to improve the accuracy of its response.
Best performing model
The discussion surrounding DeepSeek’s R1 seems to be ScaleAI CEO Alexander Wang touting its competitiveness with the best offerings from the big U.S. tech giants, which most believe are leading the AI wars.
“We found that at Deep Search, the leading AI lab in China, their models were actually the best performers, or roughly on par with the best U.S. models,” said Wang, whose company provides data to help companies train theirs. Artificial Intelligence Tools,” CNBC said world economic forum held last week in Davos, Switzerland.
Wang noted that DeepSeek actually has more Nvidia H100 chips than expected – about 50,000. These chips are Selected processor For American artificial intelligence companies such as OpenAI, the United States has banned the sale of advanced artificial intelligence chips to China.
Nvidia shares fell 3% on Friday as talk about DeepSeek began to heat up.
#1 App
But it wasn’t until last weekend that the hype surrounding DeepSeek reached a crescendo on social media.
Marc Andreessen, co-founder and general partner of venture capital firm Andreessen Horowitz, praised DeepSeek for X, calling the R1 model “one of the most stunning and impressive breakthroughs” he has ever seen. Andreessen’s portfolio includes Airbnb and dozens of artificial intelligence companies.
Tech investor Chamath Palihapitiya on reasoning.
Chinese artificial intelligence application DeepSeek has launched on Apple’s US App Store on iPhone 12.
Image Alliance | Getty Images
At this point, DeepSeek’s mobile app soared to the top of the U.S. Apple App Store download charts over the weekend, signaling a real threat to pricier models like OpenAI’s ChatGPT.
U.S. futures fell sharply overnight on Sunday, with investors waking up to a sea of red on Monday morning.
Nasdaq, 1 day
AI darling, chip manufacturer NVIDIA Shares fell more than 12% on Monday, on track for their worst day since March 2020.
NVIDIA, 1 day
Other chipmakers have been hit hard, as have power suppliers. The tech-heavy Nasdaq fell 3.6% on Monday, dragged down by large-cap stocks.
