Chinese AI DeepSeek Raises Concerns for US Tech

Donald Trump's "wake-up call" regarding the new Chinese AI model, DeepSeek, follows Nvidia's staggering $600 billion market value loss. DeepSeek's emergence triggered a sharp decline in AI-focused company stocks. Nvidia, a GPU market leader crucial for AI model operation, suffered the most, experiencing a record-breaking 16.86% share drop. Microsoft, Meta, Alphabet, and Dell Technologies also saw significant declines.

DeepSeek's arrival has shaken the AI industry. Photo by NICOLAS TUCAT/AFP via Getty Images.

DeepSeek's R1 model is marketed as a significantly more affordable alternative to Western AI offerings like ChatGPT. Leveraging the open-source DeepSeek-V3, it reportedly demands less computing power and boasts a training cost estimated at just $6 million.

Although this claim has faced scrutiny, DeepSeek has raised questions about the massive investments American tech giants are pouring into AI, unnerving investors. Its popularity surged, reaching the top of the U.S. free app download charts amidst growing discussions about its capabilities.

Sheldon Fernandez, DarwinAI co-founder, commented to CBC News, stating that DeepSeek's performance rivals leading Silicon Valley models, potentially surpassing them in certain areas, but using a fraction of the resources. This challenges the business models of many companies justifying their high valuations, as consumers can access similar features for free instead of paying substantial subscription fees.

Trump, however, offered a more optimistic perspective, suggesting DeepSeek could be beneficial for the U.S. by reducing development costs while achieving comparable results. He emphasized the potential for cost savings and maintained the U.S.'s continued AI dominance.

Despite DeepSeek's impact, Nvidia remains a $2.90 trillion company. The upcoming release of the RTX 5090 and RTX 5080 GPUs is generating immense anticipation, with consumers already lining up in the cold to secure these highly sought-after graphics cards.