A Shockwave Across the Tech Sector
On Monday, global tech companies, particularly those with significant investments in artificial intelligence, experienced their worst stock market crash in years. This turmoil followed the unveiling of an advanced AI model by Chinese startup DeepSeek, which promises to rival U.S. technologies at a fraction of the cost and computing resources.
Nvidia Takes a Major Hit
The sharpest decline was recorded by Nvidia, a leader in AI-related microchips, controlling around 90% of the market. Its stock fell by 17%, wiping nearly $600 billion off its market valuation—the most significant loss in history for any publicly traded company.
Other chipmakers, such as Micron and Broadcom, also faced significant declines, both dropping by over 10%. Major tech giants like Alphabet (Google’s parent company), Meta (Facebook’s owner), and Microsoft lost between 2% and 4% due to their substantial involvement in AI projects.
Impact Beyond the Tech Industry
The disruption wasn’t confined to the tech sector. The energy market was hit as well, with Siemens Energy seeing a 20% drop and Cameco, an uranium supplier, falling by 13%. Investors feared that more efficient AI systems, like those developed by DeepSeek, could reduce global energy demand, threatening previous investments in energy infrastructure.
Tuesday Recovery Offers a Glimmer of Hope
As often happens with sudden market crashes, some recovery followed on Tuesday. Nvidia’s stock rebounded by 6%, and Microsoft saw a 2% rise. However, the long-term implications of DeepSeek’s advancements remain uncertain.
DeepSeek’s Game-Changing Technology
Founded by Liang Wenfeng in Hangzhou, DeepSeek develops large language models (LLMs) similar to ChatGPT, Claude, and Google Gemini. Its recent release of the AI model V3 quickly became a market sensation, leading to DeepSeek’s app becoming the most downloaded on both Apple’s App Store and Google Play.
On January 20, the company unveiled R1, which it claims can rival o1, the current market leader from OpenAI. What shocked the industry was DeepSeek’s claim that developing V3 cost only $5.6 million, compared to the $100 million spent on GPT-4 and the up to $1 billion required for more advanced models. Additionally, DeepSeek stated that it used just 2,000 microchips, a stark contrast to the 16,000 chips typically required for systems like ChatGPT.
What This Means for the Future of AI
If DeepSeek’s claims hold true, the foundation of future investments in AI could be fundamentally shaken. Nvidia’s stock had surged 700% since the launch of ChatGPT, driven by the assumption that AI progress would require ever-increasing computing power. DeepSeek’s efficiency challenges this assumption and suggests a potential shift in industry priorities.
Is the AI Bubble at Risk of Bursting?
Some analysts have warned of a potential “AI bubble,” though it may be premature to draw conclusions. For one, DeepSeek’s financial claims remain under scrutiny. Additionally, its achievements could ignite fierce competition between U.S. and Chinese tech companies, possibly leading to even more significant investments in AI development.
“A Sputnik Moment” for AI
Marc Andreessen, a prominent American investor, described DeepSeek’s advancements as the “Sputnik moment” for AI, drawing a parallel to the Soviet Union’s space achievement that sparked the U.S.-Soviet space race. Intense competition often drives investment growth rather than decline, meaning that AI spending could increase in the long run, but the beneficiaries of this shift remain uncertain. As Marc Benioff, CEO of Salesforce, noted, “Pioneers are rarely the ultimate winners.”