DeepSeek Shakes Up the AI Landscape
Chinese AI application DeepSeek arrived with a bang, triggering a selloff in US tech stocks today.
1.27.2025
AI-darling NVIDIA dropped 17.0%, falling from its perch as the world’s most valuable company to fourth on the list. The NASDAQ fell 3.1%. Some key takeaways:
Efficiency Advantage: DeepSeek performs similar to market-leading AI applications but trained its model much more efficiently. It functions at a fraction of the cost.
Easier to Follow than Lead: DeepSeek’s success is highly reliant on the groundbreaking work of other AI models like ChatGPT and Claude. Said differently, it appears that DeepSeek was trained on these other models.
Global Competition: The success of a Chinese AI company challenges the dominance of US tech firms, proving cost-effective alternatives can compete with state-of-the-art models.
What Moat?: US Tech Companies’ massive investments in AI were seen as a competitive moat. After DeepSeek’s success, the market is questioning some of these investments.
Sanctions?: It’s not yet clear how DeepSeek was able to generate its results given export restrictions on leading semiconductor chips. Authorities are looking into whether DeepSeek evaded sanctions. This is still unfolding, but it wouldn’t be surprising if the US tightens sanctions further.
The Good News: The release of lower cost AI applications could drive increased competition and innovation, broader adoption, and further boosts to productivity.
DeepSeek’s rapid ascent shows that innovation is not confined to Silicon Valley. The dynamics of the AI market are exciting and changing quickly. Keep watching this space.
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