On Monday, the stock market reacted sharply to the launch of DeepSeek, a Chinese AI app that claims to match the capabilities of leading American tech firms at a fraction of the cost. Established in 2023, DeepSeek’s success led to significant losses for major companies like Nvidia, which lost $560 billion in a day. Additionally, DeepSeek faced a cyberattack, temporarily halting user registrations, while its unique approach focuses on incentivizing problem-solving rather than direct teaching.
The Impact of DeepSeek on the Stock Market
On Monday, the stock market experienced a significant tremor, triggered by a Chinese application that introduced a groundbreaking artificial intelligence model. This new contender claims to rival the capabilities of established American tech giants, but at a fraction of the cost.
Introducing DeepSeek
DeepSeek, established in 2023 in Hangzhou, eastern China, has quickly made a name for itself in the realm of artificial intelligence. This innovative app has garnered impressive performance ratings and recently surpassed ChatGPT in download rankings on the iPhone in the United States.
The application is the brainchild of the artificial intelligence research division of High-Flyer, a hedge fund owned by Chinese entrepreneur Liang Wenfeng. It has emerged as a formidable player in the AI landscape.
Cost-Effective AI Solutions
Traditionally, it was believed that developing advanced AI models required significant investment in high-end computer chips. Major American companies like Alphabet and Meta Platforms have poured billions into their AI initiatives. However, DeepSeek has managed to deliver comparable capabilities to its American counterparts, having invested only $5.6 million in its development.
This revelation sent shockwaves through the stock market, leading to a steep decline in the shares of major tech firms in both the United States and Japan. Nvidia, in particular, faced an unprecedented loss of $560 billion in a single day, marking a historic low according to Bloomberg. This loss eclipsed the previous record held by Nvidia itself, which had plummeted by $279 billion on September 3.
The Fallout for Tech Giants
Other technology leaders also felt the impact, with Broadcom dropping by 17.40%, AMD declining by 6.37%, Micron falling by 11.67%, and Marvell Technology sinking by 19.11%. Alphabet (Google) and Microsoft also reported losses of 4.33% and 2.14%, respectively, contributing to a broader market decline.
Nvidia’s Unexpected Vulnerability
Nvidia had previously positioned itself as a frontrunner in the artificial intelligence revolution, supplying the chips that powered many of the most advanced AI models. The company’s strategy hinged on the assumption that future AI developments would necessitate even more sophisticated chips. However, the emergence of DeepSeek challenges this notion, suggesting that such hardware may not be as essential as once believed.
DeepSeek Under Scrutiny
In a twist of events, DeepSeek announced on Monday that it was facing a “large-scale malicious cyberattack,” prompting the company to temporarily restrict user registrations. This development adds a layer of complexity to the narrative surrounding the app.
The Unique Approach of DeepSeek
In a recent article, the team behind DeepSeek shared insights into their innovative approach to artificial intelligence. Instead of explicitly teaching the model how to tackle problems, they focus on providing the right incentives, allowing it to organically develop new strategies. This novel method sets DeepSeek apart in the competitive landscape of AI applications.