Chinese AI Giant DeepSeek Poses Challenge to US Tech

Donald Trump has labeled China's new AI model, DeepSeek, a "wake-up call" for the U.S. tech sector following Nvidia's staggering $600 billion market value loss. DeepSeek's arrival triggered a sharp decline in AI-focused company stocks. Nvidia, a major GPU supplier for AI, suffered the most, experiencing a record-breaking 16.86% share drop. Other companies, including Microsoft, Meta Platforms, Alphabet (Google's parent company), and Dell Technologies, also saw significant declines, ranging from 2.1% to 8.7%.

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 requires less computing power and had an estimated training cost of just $6 million. While this claim has been contested, it has raised questions about the massive investments made by American tech companies in AI, unsettling investors. DeepSeek's popularity surged, reaching the top of U.S. free app download charts amid growing discussions about its capabilities.

Sheldon Fernandez, co-founder of DarwinAI, commented to CBC News, stating that DeepSeek's performance rivals leading Silicon Valley models, potentially even surpassing them in some areas, but at a fraction of the cost. This significantly disrupts the business models of many companies, challenging their high valuations, as consumers can access comparable 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 similar results. He emphasized the potential for cost savings and maintained his belief in continued U.S. AI dominance.

Despite DeepSeek's impact, Nvidia remains a $2.90 trillion company. The company is poised to launch its highly anticipated RTX 5090 and RTX 5080 GPUs later this week, generating significant consumer demand, as evidenced by customers braving inclement weather to queue outside stores.