Investors around the world are reevaluating their positions in major technology stocks following the emergence of a low-cost Chinese artificial intelligence model. DeepSeek, a Chinese AI startup, unveiled a free assistant last week that operates using less data at a fraction of the cost of models from established players. This development is casting doubts on the dominance of Western companies in the AI sector.
On Monday, technology giants saw significant declines in stock values. Futures on the Nasdaq 100 slid almost 4%, signaling a potential major downturn. Shares in AI chipmaker Nvidia fell 10%, Oracle dropped 8%, and AI data analytics company Palantir lost 7% in pre-market trading.
DeepSeek's assistant, which has already surpassed U.S. rival ChatGPT in Apple Store downloads, offers a viable and cost-effective AI alternative. This has raised questions about the sustainability of the substantial investments made by Western companies like Apple and Microsoft in AI development.
'Sputnik Moment' in AI
Silicon Valley venture capitalist Marc Andreessen referred to DeepSeek's R1 model as AI's \"Sputnik moment,\" drawing parallels to the 1950s space race sparked by the Soviet Union's satellite launch. \"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,\" Andreessen stated.
The ripple effect of DeepSeek's announcement was felt globally. From Tokyo to Amsterdam, shares in AI-focused companies tumbled. In Europe, semiconductor equipment maker ASML dropped nearly 11%, while in Japan, SoftBank Group slid more than 8% after announcing a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
Jon Withaar, a senior portfolio manager at Pictet Asset Management, commented, \"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, as cost is obviously much lower meaning lower cost of access.\"
Reassessing AI Investments
The enthusiasm surrounding AI has propelled significant capital into equity markets, inflating company valuations and pushing stock markets to record highs. However, DeepSeek's entry into the market is prompting investors to question the levels of capital expenditure by major tech companies.
\"The market is questioning the capex 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, noted, \"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.\"
The development marks a significant moment in the AI industry, as lower costs and increased accessibility could reshape the competitive landscape. Investors and industry leaders alike are watching closely to see how this will impact global technology markets.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
