Does the DeepSeek AI advance mark a global technology tipping point?
Deepseek R1 is AI's Sputnik moment.
— Marc Andreessen 🇺🇸 (@pmarca) January 26, 2025
Advances in artificial intelligence by Chinese upstarts rattled U.S. markets on Monday, with the threat of greater competition prompting a slide in shares of the biggest technology companies.
The Chinese A.I. company DeepSeek has said it can match the abilities of cutting-edge chatbots while using a fraction of the specialized computer chips that leading A.I. companies rely on. That’s prompted investors to rethink the heady valuations of companies like Nvidia, whose equipment powers the most advanced A.I. systems, as well as the enormous investments that companies like Alphabet, Meta and OpenAI are making to build their businesses.
On Monday, the S&P 500 index fell 1.5 percent, and the tech-heavy Nasdaq dropped 3.1 percent. Nvidia was hit hard, plunging 16.9 percent and losing roughly $600 billion in market value. Falling tech stocks also dented market indexes in Europe and Japan.
Excitement over the prospects for A.I. had helped send technology stocks soaring over the past year, but concerns have been rising, too. Investors have become increasingly worried that the small cohort of tech companies that drove the broader market’s gains won’t live up to the lofty expectations that their sky-high prices suggest.
The pain was concentrated at companies at the forefront of the A.I. boom, including the multitrillion-dollar behemoths that drove the largest back-to-back annual gains for U.S. markets since the 1990s. Alphabet and Microsoft fell, and in addition to Nvidia, other chipmakers like Arm, Broadcom and Micron, and semiconductor equipment specialists like ASML slid.
DeepSeek could be the start of a new phase in how investors think about A.I., said Steve Sosnick, chief strategist at Interactive Brokers. He called it a “big slap in the face” for investors that could reset the way they calculate risk. [Continue reading…]
The day after Christmas, a small Chinese start-up called DeepSeek unveiled a new A.I. system that could match the capabilities of cutting-edge chatbots from companies like OpenAI and Google.
That alone would have been a milestone. But the team behind the system, called DeepSeek-V3, described an even bigger step. In a research paper explaining how they built the technology, DeepSeek’s engineers said they used only a fraction of the highly specialized computer chips that leading A.I. companies relied on to train their systems.
These chips are at the center of a tense technological competition between the United States and China. As the U.S. government works to maintain the country’s lead in the global A.I. race, it is trying to limit the number of powerful chips, like those made by Silicon Valley firm Nvidia, that can be sold to China and other rivals.
But the performance of the DeepSeek model raises questions about the unintended consequences of the American government’s trade restrictions. The controls have forced researchers in China to get creative with a wide range of tools that are freely available on the internet.
The DeepSeek chatbot answered questions, solved logic problems and wrote its own computer programs as capably as anything already on the market, according to the benchmark tests that American A.I. companies have been using.
And it was created on the cheap, challenging the prevailing idea that only the tech industry’s biggest companies — all of them based in the United States — could afford to make the most advanced A.I. systems. The Chinese engineers said they needed only about $6 million in raw computing power to build their new system. That is about 10 times less than the tech giant Meta spent building its latest A.I. technology.
“The number of companies who have $6 million to spend is vastly greater than the number of companies who have $100 million or $1 billion to spend,” said Chris V. Nicholson, an investor with the venture capital firm Page One Ventures, who focuses on A.I. technologies. [Continue reading…]