Chinese AI Startup DeepSeek Shakes US Tech Market, Wiping $600 Billion Off Nvidia’s Value
- Tech Waves
- Feb 6
- 2 min read
A major shift in the artificial intelligence (AI) landscape has rattled US tech stocks, with almost A$1 trillion (US$600 billion) wiped from Nvidia’s market value overnight. The sharp decline came after Chinese AI startup DeepSeek unveiled its R1 chatbot, a breakthrough that has investors questioning the dominance of US tech giants.
DeepSeek’s R1 Sparks Investor Shock
DeepSeek, a relatively unknown Chinese AI developer, has introduced the R1 chatbot, which is reported to outperform existing AI models, including OpenAI’s ChatGPT 4.o1, while being significantly cheaper to develop and operate. This revelation has triggered a dramatic shift in market expectations, leading to a sharp sell-off of US technology stocks.
Nvidia, the leading AI chip manufacturer, suffered the biggest single-day market loss in history. Other tech giants, including Microsoft, Alphabet, and Amazon—heavily invested in AI tools like ChatGPT and Gemini—also saw their stock prices tumble as investors reassessed the competitive landscape.
Why US Tech Stocks Plummeted
DeepSeek’s breakthrough challenges the long-held belief that AI advancements require expensive computing power and vast amounts of data. The R1 model, operating with lower computational intensity, has demonstrated that high-performance AI can be achieved at a fraction of the cost.
This has forced investors to reconsider the financial viability of existing AI leaders, as the emergence of a low-cost, high-performing Chinese competitor could erode their market dominance.
Who is DeepSeek?
DeepSeek was founded in 2023 by High Flyer, a Chinese hedge fund that has leveraged AI in financial trading since 2021. The company specializes in large language models (LLMs) and has now positioned itself as a serious challenger to Western AI firms.
Key aspects of DeepSeek’s R1 model include:
Lower operational costs: R1 requires less computing power and training data compared to competitors.
Independence from US chips: Despite US restrictions on advanced semiconductor exports to China, DeepSeek managed to train R1 without access to Nvidia’s AI chips.
Data sovereignty concerns: R1 operates on Chinese servers, raising concerns over data privacy, intellectual property, and potential censorship by the Chinese government.
Open-source claims: Unlike ChatGPT, DeepSeek has made its chatbot’s code publicly available. However, the true workings of the AI model remain proprietary.
Content censorship: R1 aligns with the values of the Chinese Communist Party (CCP) and filters responses accordingly.
The Future of AI and Global Tech Markets
It remains unclear whether this stock market crash reflects an overreaction or a fundamental reevaluation of AI’s economic landscape.
From a technological perspective, further analysis is needed to verify whether DeepSeek’s claims of efficiency and reduced computational needs hold up under scrutiny.
Economically, AI users could benefit from more affordable access to powerful language models, potentially accelerating AI adoption and productivity gains. However, established players like Nvidia may face long-term disruption in what was once an uncontested market.
While a more energy-efficient AI future could be beneficial, the geopolitical risks of China gaining dominance in AI—along with concerns over data security and censorship—could outweigh the advantages.
The global AI race has entered a new phase, and the balance of power in the tech sector may be shifting faster than expected.
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