Investors across global markets are reacting strongly to the emergence of DeepSeek, a Chinese artificial intelligence startup that has introduced a groundbreaking, low-cost AI model. The launch of DeepSeek's free assistant has cast uncertainties over Western tech giants' dominance in the AI sector, leading to significant declines in technology stocks worldwide.
DeepSeek's new AI model, unveiled last week, promises to revolutionize the industry by utilizing less data at a fraction of the cost of existing models. This development is seen as a potential turning point in the AI landscape, challenging the substantial investments made by Western companies in AI development.
The impact was immediate on global stock markets. Futures on the Nasdaq 100 dropped nearly four percent, signaling a possible significant slide when markets open. The S&P 500 futures also fell by two percent. Major AI players felt the pressure, with shares of Nvidia declining by 10 percent, Oracle falling eight percent, and Palantir decreasing by seven percent in pre-market trading.
DeepSeek's assistant has quickly gained popularity, surpassing U.S. rival ChatGPT in downloads on the Apple Store by Monday. The prospect of a viable and more affordable AI alternative has raised questions about the sustainability of the high levels of spending and investment by Western tech companies, including industry leaders like Apple and Microsoft.
\"We still don't know all the details, but if there has been a breakthrough in reducing the cost to train AI models from over $100 million to about $6 million, this is extremely positive for productivity and AI end-users,\" said Jon Withaar, senior portfolio manager at Pictet Asset Management. \"Lower costs mean greater accessibility.\"
The development has sparked what some are calling AI's \"Sputnik moment.\" Marc Andreessen, a prominent Silicon Valley venture capitalist, remarked on social media, \"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.\"
The ripple effect of DeepSeek's announcement was felt from Tokyo to Amsterdam. In Europe, shares of ASML, a major supplier to chipmakers like TSMC, Intel, and Samsung, dropped nearly 11 percent. In Japan, SoftBank Group—an investor in tech startups—slid more than eight percent after recently announcing a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
The surge in AI development has led to massive capital inflows and inflated valuations in the tech sector over the past 18 months. Companies like Nvidia have seen their stock prices soar, trading at multiples far exceeding market averages. However, DeepSeek's emergence is prompting market participants to reassess the capital expenditures of major tech firms.
\"The market is beginning to question whether the current levels of investment in AI by the major tech companies are sustainable,\" said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore.
Some analysts urge caution, suggesting it may be premature to predict a shift in technological leadership. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, noted, \"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. But I think it might be a bit premature.\"
DeepSeek's advancement highlights the rapid pace of innovation in the AI sector, underscoring the competitive landscape between Eastern and Western tech companies. As the industry evolves, investors and businesses alike will be closely watching how these developments reshape the future of AI and global technology markets.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
