DeepSeek_s_AI_Breakthrough_Sends_Shockwaves_Through_Tech_Markets

DeepSeek’s AI Breakthrough Sends Shockwaves Through Tech Markets

Investors worldwide reacted on Monday to the emergence of DeepSeek's groundbreaking artificial intelligence model, leading to significant sell-offs in major technology stocks. Companies such as Nvidia and Oracle experienced sharp declines as the Chinese startup unveiled an AI assistant that operates at a fraction of the data and cost of existing models.

DeepSeek's new AI assistant, launched last week, promises to revolutionize the AI landscape by reducing data requirements and costs significantly. The assistant has already surpassed U.S. rival ChatGPT in downloads on the Apple Store, signaling a potential shift in the AI industry dynamics.

Futures on the Nasdaq 100 fell nearly four percent, suggesting the index could face its most substantial daily decline since September 2022. Shares of AI chipmaker Nvidia dropped 10 percent, Oracle fell eight percent, and AI data analytics company Palantir lost seven percent in pre-market trading.

From Tokyo to Amsterdam, shares in companies associated with AI technologies tumbled amid concerns over the sustainability of current investment levels in AI by Western companies, including Apple and Microsoft. The prospect of a viable, cost-effective AI alternative has prompted investors to reassess their positions in established AI giants.

Jon Withaar, a senior portfolio manager at Pictet Asset Management, commented, \"We still don't know the details and nothing has been 100 percent confirmed regarding the claims, but if there truly has been a breakthrough in the cost to train models from $100 million-plus to this alleged $6 million number, this is actually very positive for productivity and AI end-users, as cost is obviously much lower meaning lower cost of access.\"

Silicon Valley venture capitalist Marc Andreessen described DeepSeek's R1 model as AI's \"Sputnik moment,\" referencing the historic launch of the Soviet satellite that ignited the space race in the late 1950s. He stated, \"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.\"

In Europe, semiconductor equipment manufacturer ASML, which counts Taiwan's TSMC, Intel, and Samsung among its customers, dropped almost 11 percent. In Japan, startup investor SoftBank Group slid more than eight percent after announcing a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.

Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore, noted that the market was questioning the capital expenditure spending of the major tech companies. \"The idea that the most cutting-edge technologies in America, like Nvidia and ChatGPT, are the most superior globally—there's concern that this perspective might start to change,\" he said.

Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, added, \"I think it might be a bit premature.\"

The hype around AI has fueled a massive influx of capital into equity markets over the past 18 months, inflating company valuations and driving stock markets to record highs. DeepSeek's arrival introduces fresh dynamics into the AI sector, prompting investors and industry players alike to reconsider strategies in a rapidly evolving landscape.

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