In a startling turn of events, U.S. tech giant Nvidia has experienced a staggering loss of over 16% in its market value, amounting to nearly US$600 billion, following the rapid rise of DeepSeek, a Chinese AI chatbot that has quickly become the most downloaded free app in the United States.
Launched just last week, DeepSeek has raised alarms among investors in both the U.S. and Europe, leading to a broader sell-off in tech stocks. This event marks one of the largest single-day market cap losses in history, with Nvidia’s competitors like Broadcom and Alphabet also suffering notable declines.
DeepSeek’s emergence is particularly concerning for established players in the AI industry due to its cost-effective development model. The chatbot reportedly boasts capabilities comparable to those of leading AI systems while being developed at a fraction of the cost around US$6 million compared to competitors that have spent billions.
This efficiency has generated fears about the sustainability of American firms’ investments in AI technology and their ability to maintain competitive advantages in a developing scene.
The sudden popularity of DeepSeek has not only affected stock prices but also raised questions about the effectiveness of U.S. export controls aimed at limiting China’s access to advanced chip technologies.
Despite restrictions imposed by the Biden administration since 2021, DeepSeek’s developers claim to have utilized Nvidia’s H800 chips for training their model. This revelation challenges the narrative that U.S. sanctions are effectively curbing China’s technological advancements.
Adding to the turbulence, DeepSeek announced on Monday that it would temporarily limit new user registrations due to “large-scale malicious attacks” on its platform.
This decision spotlights potential vulnerabilities within the burgeoning Chinese tech ecosystem and raises concerns about cyber security as competition intensifies in the AI sector.
Liang Wenfeng, the founder of DeepSeek, has a background in electronic engineering and previously led a hedge fund that supported the startup’s development.
His strategic acquisition of Nvidia chips, which are now banned from export to China, has allowed DeepSeek to leverage existing technology while innovating with lower-cost alternatives. This approach positions DeepSeek as a formidable competitor capable of disrupting traditional market dynamics.
Industry analysts have begun likening DeepSeek’s rise to a “Sputnik moment,” referencing the shock felt in the U.S. during the Soviet Union’s technological advances in the late 1950s. As investors are left questioning whether America’s dominance in AI is at risk amid rising competition from China’s innovative and cost-efficient solutions.
