By KhabarAsia Staff Writer
In a dramatic turn of events, investors worldwide are reevaluating their stakes in major technology companies following the emergence of DeepSeek's low-cost artificial intelligence model. The Chinese startup's recent launch has sent shockwaves through global markets, casting doubt on Western firms' dominance in the AI sector.
Last week, DeepSeek unveiled a free AI assistant that operates using significantly less data at a fraction of the cost of existing models. This development is being hailed as a potential game-changer, signaling a shift in the immense investment traditionally required for AI advancements.
The impact was immediate: Futures on the Nasdaq 100 dropped nearly four percent, suggesting the index could face its most significant daily decline since September 2022. The S&P 500 futures also fell by two percent. Pre-market trading saw shares in AI chipmaker Nvidia plummet by 10 percent, Oracle decrease by eight percent, and AI data analytics company Palantir lose seven percent.
DeepSeek's AI assistant has rapidly gained popularity, overtaking U.S. rival ChatGPT in downloads on the Apple Store. The prospect of a viable, more affordable AI alternative has raised questions about the sustainability of the substantial spending and investment by Western tech giants such as Apple and Microsoft.
Global Ripples
From Tokyo to Amsterdam, the reverberations were felt as shares in AI-focused companies tumbled. \"We still don't know the details and nothing has been 100 percent confirmed regarding the claims,\" said Jon Withaar, a senior portfolio manager at Pictet Asset Management. \"But if there truly has been a breakthrough in the cost to train models from over $100 million to this alleged $6 million, this is very positive for productivity and AI end-users.\"
The intense hype surrounding AI has fueled massive capital inflows into equity markets over the past 18 months. Investors have eagerly backed the technology, inflating company valuations and propelling stock markets to record highs. However, DeepSeek's advancement may herald a new era where cost-effective AI solutions disrupt the status quo.
'Sputnik Moment' for AI
Silicon Valley venture capitalist Marc Andreessen referred to DeepSeek's R1 model as AI's \"Sputnik moment,\" alluding to the Soviet Union's 1957 satellite launch that ignited 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 posted on social media platform X.
European semiconductor firm ASML, which counts TSMC from the Taiwan region, Intel, and Samsung as customers, saw its shares drop almost 11 percent. In Japan, SoftBank Group, a major startup investor, slid more than eight percent after announcing a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
Rethinking Investments
Big Tech companies have significantly increased spending on developing AI capabilities, with optimism over potential returns driving stock valuations to lofty heights. Nvidia's shares alone have surged over 200 percent in about 18 months, trading at 56 times the value of its earnings.
\"The market is questioning the capital expenditure of the major tech companies,\" said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, added, \"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.\"
As the global AI landscape shifts, investors and industry leaders alike are bracing for what could be a transformative period, with lower-cost models like DeepSeek's potentially leveling the playing field and redefining competitive dynamics in the technology sector.
Reference(s):
DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
