China really shook up the western artificial intelligence market with the rise of DeepSeek. The Chinese AI startup gathered interest among investors for its R1’s functionality and accuracy compared to its U.S. counterparts.
DeepSeek claimed that its model uses fewer resources and less compute power, which is being seen as a major win in the AI industry. However, that may not be good news for the semiconductor industry.
READ: China disrupts AI market with DeepSeek: A better, cheaper version of ChatGPT? (January 27, 2025)
Reportedly, Nvidia saw its stock plummet 16.9% from the close of public markets on Friday, Jan. 24 to the close of public markets on Monday, Jan. 27, according to Yahoo Finance data. Nvidia lost nearly $600 billion off of its market cap. Nvidia’s stock closed at $142.62 a share Friday afternoon. On Monday, it closed at $118.58.
There is speculation that the reason why DeepSeek’s model release would impact Nvidia’s stock is that R1 provides a clear example that AI models don’t necessarily need expensive, high-end chips or hardware to build an impressive model, which isn’t exactly great news for a chipmaker like Nvidia.
“DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling,” an Nvidia spokesperson told TechCrunch. “DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant. Inference requires significant numbers of Nvidia GPUs and high-performance networking. We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling.”
READ: China’s AI DeepSeek-V3 stuns, disrupts and rattles Silicon Valley (January 27, 2025)
DeepSeek is a Chinese AI startup that specializes in artificial intelligence technology, particularly in areas like deep learning and machine learning. The company focuses on developing advanced AI algorithms and solutions for various industries, including healthcare, finance, and security. DeepSeek aims to leverage AI to provide more efficient and accurate systems, often targeting applications such as natural language processing (NLP), computer vision, and data analysis.