Investors took a sharp turn on Monday, selling off major technology stocks like Nvidia and Oracle, following the introduction of DeepSeek's innovative artificial intelligence model. This move marks what some analysts are calling a 'Sputnik moment' for AI, raising questions about the future dominance of Western tech giants.
DeepSeek, a burgeoning startup, launched a free AI assistant last week that promises to deliver comparable performance to existing models while utilizing significantly less data and reducing costs. This breakthrough has positioned DeepSeek ahead of established rivals such as ChatGPT in download rankings on the Apple Store, signaling a potential shift in the AI investment landscape.
The market reacted swiftly, with Nasdaq 100 futures dropping nearly four percent and S&P 500 futures down two percent. Shares of AI-centric companies saw notable declines: Nvidia fell 10 percent, Oracle dropped eight percent, and Palantir decreased by seven percent in pre-market trading. The ripple effect extended globally, affecting European firms like ASML and Japanese investor SoftBank Group, which saw their stocks tumble by almost 11 percent and over eight percent respectively.
Jon Withaar, a senior portfolio manager at Pictet Asset Management, highlighted the positive implications of DeepSeek's advancements. \"If there truly has been a breakthrough in the cost to train models from $100 million+ to this alleged $6 million number, this is actually very positive for productivity and AI end users,\" Withaar commented.
Marc Andreessen, a prominent Silicon Valley venture capitalist, echoed this sentiment on social media, referring to DeepSeek's R1 model as AI's \"Sputnik moment,\" likening it to the historic space race event that challenged existing paradigms.
The surge in AI enthusiasm over the past 18 months has driven substantial capital into tech equities, inflating valuations and propelling stock markets to record highs. Nvidia, for instance, has seen its stock price rise by over 200 percent in this period, trading at a valuation multiple significantly higher than the broader Nasdaq index.
However, this optimism is now under scrutiny. Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore, noted that the market is beginning to question the capital expenditure strategies of leading tech companies. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, added, \"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.\"
As DeepSeek continues to challenge established AI players with its cost-effective solutions, the industry watches closely to see how these developments will influence future investments and the broader technological landscape.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
