Investors around the globe are reevaluating their positions in major technology stocks following the emergence of DeepSeek's revolutionary artificial intelligence (AI) model. The Chinese startup's launch of a low-cost AI assistant has sparked a significant sell-off in big AI players, casting doubts on the dominance of Western companies in the sector.
DeepSeek's AI assistant, released last week, boasts the ability to operate using less data at a fraction of the cost of incumbent models. This development has been likened to a 'Sputnik moment' for AI, referencing the pivotal point in history when the former Soviet Union launched the Sputnik satellite, igniting the space race.
Markets reacted swiftly to the news. Futures on the Nasdaq 100 slid nearly four percent, signaling a potential significant downturn. Major AI chipmaker Nvidia saw its shares fall by 10 percent, Oracle dropped eight percent, and AI data analytics company Palantir lost seven percent in pre-market trading.
DeepSeek's assistant has quickly gained popularity, overtaking U.S. rival ChatGPT in Apple Store downloads. Offering a viable and cheaper alternative, it raises questions about the sustainability of the substantial investments made by Western tech giants like Apple and Microsoft in AI development.
\"We still don't know the details and nothing has been 100 percent confirmed regarding the claims,\" said Jon Withaar, a senior portfolio manager at Pictet Asset Management. \"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, as cost is obviously much lower, meaning lower cost of access.\"
From Tokyo to Amsterdam, shares in AI-focused companies tumbled. In Europe, ASML Holding, which counts Taiwan's TSMC, Intel, and Samsung among its customers, dropped almost 11 percent. In Japan, SoftBank Group slid more than eight percent after announcing a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
Marc Andreessen, a prominent Silicon Valley venture capitalist, expressed his astonishment on social media, stating that DeepSeek's R1 model is \"one of the most amazing and impressive breakthroughs I've ever seen – and as open source, a profound gift to the world.\"
Nick Ferres, Chief Investment Officer at Vantage Point Asset Management in Singapore, noted that the market is questioning the capital expenditure of major tech companies. \"The emergence of cost-effective AI solutions like DeepSeek's could redefine investment strategies and valuations in the tech sector,\" he said.
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.\"
The rapid ascent of DeepSeek highlights the dynamic and competitive nature of the global AI landscape. As Chinese companies continue to innovate, investors and industry leaders worldwide will be watching closely to see how this shift impacts the future of technology and investment.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
