A Chinese artificial intelligence company called DeepSeek is attracting American attention and shocking Wall Street with its new technology. Some experts say the technology is comparable to OpenAI’s ChatGPT.
DeepSeek also caught investors off guard by the low cost of developing its AI app, which Wedbush Securities analyst Dan Ives estimated cost just $6 million. By contrast, OpenAI, Google and other major U.S. companies plan to invest a total of about $1 trillion in AI over the next few years, according to Goldman Sachs.
On Monday, DeepSeek’s rollout spooked stocks in AI heavyweights including Nvidia, a fast-growing maker of advanced chips designed for AI development, and another chipmaker, Netherlands’ ASML. Experts say the Chinese company’s technology stakes are weighing whether demand for Nvidia’s chips could take a hit, and investors in tech stocks that have been buoyed by AI hopes, from Meta to Microsoft. This raises the question of whether this is an overestimation.
“Deep Seek has taken the market by storm by enabling people to do more with less,” Giuseppe Sette, president of AI market research firm Reflexivity, said in an email. “This shows that AI will continue to surprise us in the years to come.”
DeepSeek’s latest app arrived just days after Trump’s announcement. $500 billion new venture In partnership with ChatGPT maker OpenAI, SoftBank and Oracle, it was named Stargate and he touted it as ensuring the “future of technology” in the United States.
AI stocks took a hit Monday morning, with Nvidia stock down 14.5% and ASML down 6.7% as of 11 a.m. ET. The tech-heavy Nasdaq index fell 2.9% in early trading, while the S&P 500 index fell 1.7%.
Despite the Nasdaq’s sharp decline, it’s not the worst day for the index in five years. The worst one-day decline since January 27, 2020 was on March 16, 2020, when the index fell by 12% as the coronavirus pandemic hit the economy. It fell more than that.
What is deep seek?
According to MIT Technology Review, DeepSeek is a private Chinese company founded in July 2023 by Liang Wenfeng, an alumnus of Zhejiang University, one of China’s top universities, who funded the startup through his own hedge fund. did. Mr. Liang is worth about $8 billion, Mr. Ives wrote in a Jan. 27 research note.
Liang, who previously focused on applying AI to investments, had purchased a “stockpile of Nvidia A100 chips,” a type of technology that is currently banned from export to China. These chips became the basis for DeepSeek, the MIT publication reported.
Is DeepSeek available in the US?
The company’s AI apps are available in Apple’s App Store and online at its website. The service is free and was the top download on the Apple Store as of Monday morning, but some people had trouble signing up for the app.
The company released its latest AI model on January 20th, sparking a reassessment of the AI sector on Wall Street.
“Last week, DeepSeek announced a model that rivals OpenAI’s ChatGPT and Meta’s Llama 3.1, and over the weekend it reached number one on Apple’s App Store,” Wedbush’s Ives wrote. “DeepSeek built its model using reduced-featured chips from Nvidia, which is impressive and therefore put a lot of pressure on the Nasdaq this morning and caused a huge upset in US tech stocks.”
How is DeepSeek different from other AI apps?
DeepSeek is an open source large-scale language model that relies on so-called “inference-time computing.” In layman’s terms, this means “activating only the most relevant parts of the model for each query, saving cost and expense,” according to Sette. calculation ability. ”
Some experts have praised DeepSeek’s performance, with prominent technology investor Marc Andreessen writing in X on January 24th: ”
But Ives said he was skeptical that the service would catch on with major U.S. companies.
“No U.S. Global 2000 company is going to rely on Chinese startup DeepSeek to launch its own AI infrastructure and use cases,” Ives wrote. “At the end of the day, there’s only one chip company in the world that’s launching autonomous, robotics, and broader AI use cases, and that’s Nvidia.”
What does DeepSeek mean for Nvidia and other technology companies?
Wall Street is trying to assess the long-term impact of a low-cost Chinese AI tool that rivals ChatGPT and other so-called generative AI apps. It also raises questions about whether Silicon Valley is overspending on technological advancements in AI, Angelo Gino, senior equity analyst at CFRA Research, said in an email.
Jay Woods, chief global strategist at Freedom Capital Markets, said: “The fact that this technology consumes less energy and is considered more cost-effective than US-based models makes the US technology more attractive. “This is making investors very concerned.”
Also, given that Trump has ordered the Justice Department to give Chinese-owned TikTok a moratorium, but has raised the possibility of imposing new tariffs on imports from China, it is unclear what the White House will do. It is unclear whether there will be any backlash or reaction. don’t force An impending ban.
Meanwhile, major tech companies such as Meta and Microsoft are scheduled to report earnings this week, where investors will hear more from executives about their AI plans and thoughts on Deep Seek, experts say. .
Some Wall Street analysts believe Monday’s selloff was an overreaction, noting that huge demand for AI will continue to drive the sector’s major companies higher.
“Training[large language]models for less money is one thing, but it still requires a huge amount of infrastructure to keep up with the huge demand for consumption of all this AI technology. VitalKnowledge’s Adam Crisafulli said in a report.
