Nvidia, the US tech behemoth, lost more than a sixth of its value after the rising popularity of a Chinese artificial intelligence (AI) app alarmed investors in the United States and Europe.
DeepSeek, a Chinese AI chatbot apparently built for a quarter of the cost of its competitors, debuted last week but has already become the most downloaded free app in the United States.
Nvidia, the world’s largest AI chipmaker, and other AI-related tech companies such as Microsoft and Google saw their stock prices fall on Monday following DeepSeek’s unexpected gain.
In a separate development, DeepSeek said on Monday that it will temporarily suspend registrations due to “large-scale malicious attacks” against its software.
The DeepSeek chatbot was apparently produced for a fraction of the cost of its competitors, raising concerns about the future of America’s AI superiority and the magnitude of US corporations’ planned investments.
Last week, OpenAI joined a consortium of other companies that offered $500 billion (£400 billion) to construct AI infrastructure in the United States.
In one of his first statements since coming to office, President Donald Trump described it as “the largest AI infrastructure project by far in history” that will help keep “the future of technology” in the United States.
DeepSeek is powered by the open source DeepSeek-V3 model, which its researchers claim was trained for approximately $6 million – substantially less than rivals’ billions.
Other AI experts, however, have contested this assertion.
According to the researchers, they use both existing technology and open source code, which is software that anybody may use, modify, or distribute for free.
DeepSeek’s development coincides with the US’s restriction on the sale of advanced microprocessor technology used to fuel AI to China.
To continue their work in the absence of consistent supplies of imported advanced chips, Chinese AI developers collaborated and experimented with novel approaches to the technology.
This has resulted in AI models that demand significantly less computational resources than previously.
It also means that they are far cheaper than previously anticipated, which has the potential to disrupt the sector.
When DeepSeek-R1 was released earlier this month, the business bragged of “performance on par with” one of OpenAI’s most recent models when employed for tasks like math, coding, and natural language thinking.
DeepSeek-R1 was dubbed as “AI’s Sputnik moment” by Silicon Valley venture capitalist and Trump adviser Marc Andreessen, referring to the Soviet Union’s 1957 satellite launch.
At the time, the US was seen to have been caught off guard by their competitor’s technological advancement.
DeepSeek’s unexpected popularity has surprised stock markets in Europe and the United States.
In the United States, AI chipmaker Nvidia closed Monday’s trading down 16.9%, while rival Broadcom fell 17.4%.
Other tech companies also fell, with Microsoft down 2.14% and Alphabet, Google’s parent company, down more than 4%.
In Europe, ASML, a Dutch chip equipment maker, had its share price fall by more than 7% on Monday, while shares in Siemens Energy, which develops AI-related hardware, fell by a fifth.
“This idea of a low-cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,” said Fiona Cincotta, senior market analyst at City Index.
“So, if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure.”
Vey-Sern Ling, a Singapore-based technology equity strategist, told the BBC that it may “potentially derail the investment case for the entire AI supply chain”.
“We estimate that in an inevitably more restrictive environment, US access to more advanced chips is an advantage,” according to a paper. Meanwhile, DeepSeek confirmed on Monday that it had been the target of a hack.
“Due to large-scale malicious attacks on DeepSeek’s services, we are temporarily limiting registrations to ensure continued service,” the company said in a release. “Existent users can log in as normal. Thank you for your understanding and support.
Who founded DeepSeek?
Liang Wenfeng launched the corporation in 2023 in Hangzhou, a city in southeast China. The 40-year-old, who graduated in information and electronic engineering, also formed the hedge fund that backed DeepSeek.
He apparently accumulated a stockpile of Nvidia A100 chips, which are now prohibited from shipment to China. Experts believe that this collection, which some estimate to be around 50,000, inspired him to establish DeepSeek, which pairs these chips with cheaper, lower-end ones that are still available for import.
Mr. Liang was recently observed attending a meeting between industry experts and Chinese Premier Li Qiang.
In a July 2024 interview with The China Academy, Mr Liang expressed surprise at the response to the previous version of his AI program.
“We didn’t expect pricing to be such a sensitive issue,” he told me.
“We were simply following our own pace, calculating costs, and setting prices accordingly.”
Comments are closed, but trackbacks and pingbacks are open.