A Chinese artificial intelligence company called DeepSeek is grabbing America’s attention — and sending a shock wave through Wall Street — due to its new tech, which some experts say rivals that of OpenAI’s ChatGPT.
DeepSeek is also catching investors off guard because of the low development costs for its AI app, which Wedbush Securities analyst Dan Ives pegged at only $6 million. By comparison, OpenAI, Google and other major U.S. companies are on track to invest a total of roughly $1 trillion in AI over the coming years, according to Goldman Sachs.
On Monday, DeepSeek’s rollout roiled shares of AI stalwarts such as Nvidia, the high-flying manufacturer of advanced chips engineered for AI development, and Dutch company ASML, another chipmaker. The Chinese company’s tech is raising questions about whether demand for Nvidia’s chips could take a hit, as well as whether investors are overvaluing tech stocks that have been buoyed by the promise of AI, from Meta to Microsoft, experts said.
“DeepSeek has taken the market by storm by doing more with less,” said Giuseppe Sette, president at AI market research firm Reflexivity, in an email. “This shows that with AI the surprises will keep on coming in the next few years.”
DeepSeek’s latest app comes just days after Mr. Trump announced a new $500 billion venture with ChatGPT maker OpenAI, Softbank and Oracle, dubbed Stargate, which he touted as ensuring “the future of technology” in the U.S.
AI-related stocks took a hit on Monday morning, with Nvidia shares tumbling 14.5% as of 11 a.m. ET, while ASML shed 6.7%. The tech-heavy Nasdaq index slumped 2.9% in early trading, while the S&P 500 declined 1.7%.
Despite the sharp drop on the Nasdaq it’s far from the worst day for the index during the past five years. The worst one-day decline since Jan. 27, 2020, came on March 16, 2020, when the index plunged more than 12% as COVID-19 pandemic hit the economy.
What is DeepSeek?
DeepSeek is a private Chinese company founded in July 2023 by Liang Wenfeng, a graduate of Zhejiang University, one of China’s top universities, who funded the startup via his hedge fund, according to the MIT Technology Review. Liang has about $8 billion in assets, Ives wrote in a Jan. 27 research note.
Liang, who had previously focused on applying AI to investing, had bought a “stockpile of Nvidia A100 chips,” a type of tech that is now banned from export to China. Those chips became the basis of DeepSeek, the MIT publication reported.
Is DeepSeek available in the…
Read More: What is DeepSeek, and why is it causing Nvidia and other stocks to slump?
