Chinese AI startup DeepSeek has shaken the global tech landscape with its groundbreaking AI model, R1, which rivals US-developed technologies at a fraction of the cost. Despite restrictions on advanced AI chip exports to China, DeepSeek trained its model on underpowered chips, spending just $5.6 million, compared to the billions invested by US tech giants like OpenAI, Google, and Meta.
This disruptive innovation has caused a sharp selloff in US tech stocks. Nvidia, the leading AI chip provider, experienced a 12% decline in premarket trading, while Meta, Alphabet, and other major players also suffered significant losses. With tech stocks accounting for 45% of the S&P 500, the broader market faced steep declines, with S&P 500 futures and the Nasdaq showing notable drops.
Tech investor Marc Andreessen called DeepSeek’s advancement “one of the most impressive breakthroughs,” highlighting its potential to challenge US dominance in AI innovation. Meanwhile, analysts are questioning the efficiency of massive AI spending by US firms. For example, Meta plans to invest $65 billion in AI this year, and OpenAI estimates trillions of dollars in future industry investments.
While DeepSeek’s success raises concerns about global competition, experts believe it will take more than one breakthrough to disrupt the years of progress and leadership established by US companies. As tech giants respond to this development, market trends remain uncertain.
