The launch of DeepSeek, a new AI chatbot developed by a Chinese startup, has sent shockwaves through global markets, wiping over $1 trillion from the leading US tech index.
The AI model, seen as a direct competitor to OpenAI’s ChatGPT, has disrupted investors and shaken up the tech industry.
What truly rattled the industry was DeepSeek’s claim that it developed its latest model, the R1, at a fraction of the cost that major companies are investing in AI development, primarily on expensive Nvidia chips and software.
The development is significant given the AI boom, ignited by ChatGPT’s release in late 2022, has propelled Nvidia to become one of the world’s most valuable companies.
The Nasdaq Composite fell 3.1%, wiping out more than $1 trillion from its previous value of $32.5 trillion, as investors reacted to the implications of DeepSeek’s emergence.
Nvidia, a key player in providing the chips that power AI models, saw its market value fall sharply by 17%, ceding its position as the most valuable listed company in the US to Apple. Nvidia’s loss amounted to nearly $600 billion, while Google’s parent company Alphabet and Microsoft lost $100 billion and $7 billion, respectively.
DeepSeek, which surpassed OpenAI’s ChatGPT in both the US and UK Apple app stores over the weekend, has garnered significant attention.
Read more: DeepSeek hit by cyberattack as users flock to Chinese AI startup
US President Donald Trump called the development a “wake-up call” for the US, emphasizing the need to stay competitive with China’s growing prowess in AI technology. He praised the lower cost and faster AI methods being developed by Chinese companies.
OpenAI’s CEO Sam Altman also acknowledged DeepSeek’s launch, describing it as invigorating to see new competition in the field. He noted that DeepSeek’s offering was impressive, particularly in terms of affordability and performance.
However, DeepSeek’s debut was marred by a cyber-attack on Monday, which temporarily halted new user registrations.
The company confirmed it had suffered a “large-scale malicious attack” and, after investigating, took steps to secure its platform. Existing users were not impacted and could still access the service.
DeepSeek claims to have developed its AI models using fewer chips than its competitors, making the technology cheaper to produce and raising questions about the ongoing multibillion-dollar AI investments from US tech giants.
