Investors are reeling as DeepSeek, a rising AI startup, challenges the dominance of Western tech giants with its cost-effective artificial intelligence model. On Monday, major technology stocks like Nvidia and Oracle saw significant drops, reflecting concerns over the sustainability of current AI investment levels.
DeepSeek launched its free assistant last week, boasting a model that requires less data and operates at a fraction of the cost compared to established players. This move has already seen DeepSeek surpass ChatGPT in Apple Store downloads, signaling a potential shift in the AI landscape.
Market reactions have been swift. Futures on the Nasdaq 100 fell nearly four percent, hinting at the index's largest daily decline since September 2022 if losses continue. The S&P 500 also dipped by two percent. Tech stocks are taking the hardest hits, with Nvidia shares down 10 percent, Oracle dropping eight percent, and Palantir falling seven percent in pre-market trading.
Marc Andreessen, a prominent Silicon Valley venture capitalist, described DeepSeek's R1 model as AI's \"Sputnik moment,\" drawing parallels to the Soviet Union's historic satellite launch that ignited the space race. He praised DeepSeek as an \"amazing and impressive breakthrough\" and an \"open-source gift to the world,\" highlighting the model's potential to democratize AI access by lowering costs.
This development raises critical questions about the future of AI investments by Western companies like Apple and Microsoft. The influx of capital into AI has driven company valuations to sky-high levels, and the emergence of a viable, cheaper alternative like DeepSeek could recalibrate market expectations.
Global markets are feeling the impact as well. In Europe, ASML, which counts Taiwan's TSMC, Intel, and Samsung among its customers, saw its shares drop nearly 11 percent. In Japan, SoftBank Group's shares slipped more than eight percent following its recent announcement of a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
Industry experts are now scrutinizing the capex spending of major tech firms. Jon Withaar, a senior portfolio manager at Pictet Asset Management, noted, \"If there truly has been a breakthrough in the cost to train models from $100 million+ to this alleged $6 million number, this is very positive for productivity and AI end users.\"
However, some strategists caution against premature conclusions. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, stated, \"The idea that the most cutting-edge technologies in America are the most superior globally is starting to change, but it might be a bit premature.\"
As AI technology continues to evolve, the balance of innovation and investment is likely to shift, potentially reshaping the global tech ecosystem.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
