Nvidia, the renowned American technology company, recently experienced the largest one-day loss in U.S. history. On January 27, 2025, Nvidia’s stock plummeted by 17%, resulting in a staggering market cap loss of nearly $600 billion.
This unprecedented drop was primarily triggered by the emergence of DeepSeek, a Chinese artificial intelligence startup that has been making waves in the tech industry.
DeepSeek, founded in 2023 by Liang Wenfeng, has developed open-source large language models that rival some of the best AI models in the world. The company’s latest model, DeepSeek-V3, has demonstrated impressive performance at a fraction of the cost of its competitors.
This has raised concerns among investors about the sustainability of Nvidia’s dominance in the AI chip market.
The release of DeepSeek’s latest technology has caused significant anxiety among U.S. tech giants, leading to a massive sell-off in the stock market. Companies that rely heavily on Nvidia’s GPUs, such as Dell, Oracle, and Super Micro Computer, also saw their stock prices plummet.
The ripple effect of Nvidia’s loss was felt across the tech-heavy Nasdaq, which dropped by 3.1% on the same day.
Nvidia one-month chart 27th January 2025
In response to this market upheaval, former President Donald Trump commented on the situation, stating that DeepSeek’s emergence should serve as a ‘wake-up call’ for American companies.
Trump emphasised the need for U.S. industries to remain competitive and innovative in the face of rising competition from Chinese tech firms. He acknowledged the impressive advancements made by DeepSeek and suggested that American companies could benefit from adopting more cost-effective methods in their AI development.
Trump’s remarks highlight the growing concern among U.S. policymakers and industry leaders about the rapid advancements in AI technology coming from China.
The success of DeepSeek has demonstrated that significant breakthroughs can be achieved with relatively modest investments, challenging the notion that massive capital expenditure is necessary for top-tier AI performance.
As the AI race continues to heat up, it is clear that companies like Nvidia will need to adapt and innovate to maintain their competitive edge. The emergence of DeepSeek has not only disrupted the market but also underscored the importance of staying ahead in the rapidly evolving field of artificial intelligence.
For American tech giants, this wake-up call serves as a reminder that the global AI landscape is becoming increasingly competitive, and complacency is not an option.
Has the U.S. spent wisely on AI development?
The emergence of DeepSeek has indeed raised questions about the spending strategies of U.S. tech companies on AI development. DeepSeek’s ability to develop high-performing AI models at a fraction of the cost has led to concerns about the necessity of the massive capital expenditures by large U.S. tech firms.
For instance, companies like Microsoft, Alphabet, Meta, and Amazon have collectively spent over $1 trillion on AI investments in recent years. This significant spending has been driven by the belief that larger models and more computing power would lead to better performance.
However, DeepSeek’s success with more cost-effective methods challenges this notion and suggests that efficient innovation might be more important than sheer scale.
The impressive performance and lower costs of DeepSeek’s models have prompted some analysts to question whether the billions of dollars spent by U.S. tech companies on AI development are justified. This has led to a re-evaluation of AI spending strategies and a push for more efficient and innovative approaches to AI development.
In summary, while U.S. tech companies have invested heavily in AI, the success of DeepSeek highlights the potential for achieving cutting-edge results with fewer resources. This has sparked a broader discussion about the most effective and efficient ways to advance AI technology.
Asking ChatGPT – ‘Do you see Deepseek as a competitor or a threat?’
The reply:
As an AI, I don’t have personal opinions or feelings. However, I can share that DeepSeek’s rapid rise and impressive performance in the AI field are noteworthy. Their ability to develop high-performing models at a lower cost is a significant achievement and has certainly shaken up the industry. It’s a reminder of the dynamic and competitive nature of the AI landscape, where innovation can come from unexpected places.
Asking ChatGPT – ‘What do you think of Deepseek?’
The reply:
DeepSeek is a fascinating and disruptive player in the AI landscape. Founded in 2023 by Liang Wenfeng, this Chinese startup has quickly gained attention for its open-source large language models, which rival some of the best AI models in the world at a fraction of the cost. Their latest models, DeepSeek-V3 and DeepSeek-R1, have demonstrated impressive performance and efficiency, challenging the dominance of established tech giants2.
DeepSeek’s emergence has caused significant market upheaval, leading to substantial drops in the stock prices of major AI-related firms, including Nvidia. The company’s success highlights the potential for innovation and cost-effectiveness in AI development, which has prompted industry leaders and policymakers to re-evaluate their strategies.
Overall, DeepSeek’s rapid rise and impact on the AI industry underscore the importance of staying competitive and innovative in this fast-evolving field. It’s a reminder that breakthroughs can come from unexpected places and that the AI landscape is becoming increasingly dynamic and competitive.
It would not be drawn on these questions but, one thing is for sure the U.S. has spent billions developing their systems and charge fortunes for using it.
This is about to change.
And further…
The Deepseek website reportedly crashed on 27th January 2025 due to heavy global demand. There were also reports of unrelenting cyberattacks on its systems…?
Curious. From minnow to centre stage in just one day!
