Investors around the world are reevaluating their stakes in major technology companies as DeepSeek, a startup from the Chinese mainland, unveils a groundbreaking artificial intelligence model. DeepSeek's new AI assistant, launched last week, uses significantly less data and operates at a fraction of the cost of existing models, challenging the dominance of established Western tech giants in the AI sector.
On Monday, technology stocks took a hit as shares in companies like Nvidia and Oracle experienced sharp declines. Futures on the Nasdaq 100 dropped nearly four percent, indicating a potential significant slide in the index. Nvidia, a leading AI chipmaker, saw its shares fall by 10 percent, while Oracle and Palantir dropped eight and seven percent respectively in pre-market trading.
DeepSeek's assistant has quickly gained popularity, surpassing U.S. rival ChatGPT in downloads on the Apple Store. The availability of a viable, cost-effective AI alternative has prompted investors to question the sustainability of heavy investments in AI by Western companies, including industry leaders like Apple and Microsoft.
\"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 over $100 million to this alleged $6 million number, this is very positive for productivity and AI end users,\" said Jon Withaar, a senior portfolio manager at Pictet Asset Management.
From Tokyo to Amsterdam, shares in AI-related companies tumbled. In Europe, ASML Holdings, a key supplier to semiconductor companies, dropped almost 11 percent. In Japan, SoftBank Group, which recently announced a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI, slid more than eight percent.
A 'Sputnik Moment' for AI
Marc Andreessen, a prominent venture capitalist in Silicon Valley, described DeepSeek's R1 model as AI's \"Sputnik moment,\" referencing the Soviet Union's launch of the Sputnik satellite that ignited the space race in the late 1950s. \"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 shared on social media platform X.
The surge in AI development has fueled significant capital inflows into equity markets over the past 18 months, inflating company valuations and propelling stock markets to record highs. However, DeepSeek's emergence has led to a reassessment of these valuations.
\"The market is questioning the capital expenditure spending 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, commented, \"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 DeepSeek continues to gain traction, the global tech industry watches closely to see how this development will reshape the competitive landscape of artificial intelligence.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
