DeepSeek's AI Breakthrough Sparks Investor Unrest
Global technology stocks experienced a significant downturn on Monday following the emergence of DeepSeek's new low-cost artificial intelligence (AI) model. The Chinese startup's innovation has cast doubts on the dominance of Western companies in the AI sector, prompting investors to reassess their positions.
Market Impact: Major Players Take a Hit
Shares of leading tech companies saw sharp declines as news of DeepSeek's AI assistant spread. Futures on the Nasdaq 100 fell nearly 4%, indicating a potential major slide in the index. AI chipmaker Nvidia's shares dropped 10%, Oracle plummeted 8%, and AI data analytics firm Palantir decreased by 7% in pre-market trading.
DeepSeek Overtakes Rivals
DeepSeek's assistant, which utilizes less data at a fraction of the cost of existing models, has quickly gained popularity. By Monday, it had surpassed its U.S. rival ChatGPT in downloads on the Apple Store. The prospect of a viable, cost-effective AI alternative has raised questions about the sustainability of the high levels of spending and investment on AI by Western companies.
Global Ripple Effects
The impact was felt across global markets, from Tokyo to Amsterdam, as shares in AI-focused companies tumbled. In Europe, semiconductor equipment maker ASML, which counts Taiwan Semiconductor Manufacturing Company (TSMC), Intel, and Samsung among its customers, saw its shares drop almost 11%. In Japan, SoftBank Group, a major investor in tech startups, slid more than 8% following its recent $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
Industry Reactions to DeepSeek's 'Sputnik Moment'
Marc Andreessen, a prominent Silicon Valley venture capitalist, described DeepSeek's R1 model as AI's \"Sputnik moment,\" referencing the historic launch of the first satellite by the former Soviet Union that spurred the space race. \"DeepSeek R1 is one of the most amazing and impressive breakthroughs I've ever seen—and as open source, a profound gift to the world,\" he commented on social media platform X.
Expert Opinions
Market analysts are contemplating the implications of DeepSeek's advancement. Jon Withaar, a senior portfolio manager at Pictet Asset Management, stated, \"If there truly has been a breakthrough in the cost to train models from over $100 million to an alleged $6 million, this is very positive for productivity and AI end users, as the cost of access is obviously much lower.\"
Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore, noted that the market is questioning the capital expenditure of major tech companies. \"The development poses significant questions about the current investment strategies in AI by large corporations,\" he said.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, expressed cautious optimism. \"The idea that the most cutting-edge technologies in America are the most superior globally—there's concern that this perspective might start to change,\" he commented. \"However, it might be a bit premature.\"
Future of AI Investment
Big Tech companies have significantly increased spending on developing AI capabilities, with optimism over potential returns driving stock valuations to record highs. Nvidia alone has risen by over 200% in about 18 months, trading at multiples far exceeding the average in the Nasdaq index.
The emergence of DeepSeek's cost-effective AI model has introduced a new dynamic into the global AI landscape. Investors and market analysts will closely watch how this development influences future investments and the competitive balance between Eastern and Western tech companies.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
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