Donald Trump has highlighted the emergence of the new Chinese artificial intelligence model, DeepSeek, as a significant "wake-up call" for the U.S. tech industry. This statement comes in the wake of Nvidia experiencing a staggering $600 billion reduction in its market value.
The introduction of DeepSeek has caused a dramatic decline in the stock prices of companies deeply involved in artificial intelligence. Nvidia, a leading supplier of GPUs essential for AI model operations, suffered the most significant blow with its shares plummeting by 16.86%, marking the largest single-day loss in Wall Street history. Other tech giants such as Microsoft, Meta Platforms, and Google's parent company Alphabet saw their stocks decrease between 2.1% and 4.2%, while Dell Technologies, an AI server manufacturer, experienced an 8.7% drop.
DeepSeek has sent shockwaves throughout the AI gold rush. Photo by NICOLAS TUCAT/AFP via Getty Images.
DeepSeek's R1 model is promoted as a more cost-effective alternative to Western AI offerings like ChatGPT. Built on the open-source DeepSeek-V3, it reportedly demands significantly less computational power and was developed with an estimated budget of just $6 million. Although some have challenged these assertions, DeepSeek's impact has raised questions about the vast sums American tech companies are pouring into AI development, leading to investor unease. The model's surge in popularity is evident from its position at the top of the U.S. free app download charts, fueled by discussions around its efficacy.
Sheldon Fernandez, co-founder of DarwinAI, commented on DeepSeek's performance to CBC News, stating, "DeepSeek performs as well as the leading models in Silicon Valley and in some cases, according to their claims, even better. But they did it with a fractional amount of the resources, which is really what is turning heads in our industry. Instead of paying OpenAI $20 a month or $200 a month for the latest advanced versions of these models, people can get these types of features for free. This really upends the business model that a lot of these companies were relying on to justify their very high valuations."
Despite the market turmoil, President Trump has suggested that DeepSeek could have positive implications for the U.S. He stated, as reported by the BBC, "Instead of spending billions and billions, you'll spend less and you'll come up with hopefully the same solution. If you could do it cheaper, if you could do it for less and get to the same end result, I think that's a good thing for us." Trump remains confident that the U.S. will continue to lead in AI technology.
Despite the recent market hit, Nvidia remains a formidable $2.90 trillion company. The anticipation for its upcoming RTX 5090 and RTX 5080 GPUs is high, with enthusiasts braving January's chill to camp outside stores in hopes of securing these new releases.
