Donald Trump has called China's new AI model, DeepSeek, a "wake-up call" for the U.S. tech industry, following a significant market value drop for Nvidia—nearly $600 billion. DeepSeek's emergence triggered a sharp decline in AI-related stocks. Nvidia, a major player in GPUs crucial for AI, suffered the most, experiencing a 16.86% share drop—a record on Wall Street. Microsoft, Meta Platforms, Alphabet, and Dell Technologies also saw declines ranging from 2.1% to 8.7%.
DeepSeek claims its R1 model offers a significantly cheaper alternative to Western counterparts like ChatGPT. Built on the open-source DeepSeek-V3, it reportedly requires less computing power and was trained for an estimated $6 million. While this claim is disputed by some, it has raised questions about the billions invested by American tech companies in AI, unsettling investors. DeepSeek's popularity surged, topping U.S. free app download charts amid growing discussions about its effectiveness.
"[DeepSeek] performs as well as leading Silicon Valley models and, according to their claims, even better," Sheldon Fernandez, co-founder of DarwinAI, told CBC News. "But they achieved this with a fraction of the resources, which is turning heads. Instead of paying $20 or $200 monthly for advanced models, people can get similar features for free. This disrupts the business models many companies relied on to justify high valuations."
Trump, however, offered a more optimistic perspective, suggesting DeepSeek could be beneficial for the U.S. "Instead of spending billions, you'll spend less and hopefully achieve the same solution," he stated, as reported by the BBC. He added, "If you can do it cheaper and get the same result, that's good for us," while maintaining that the U.S. will retain AI dominance.
Despite DeepSeek's impact, Nvidia remains a $2.90 trillion company. The company is set to release its highly anticipated RTX 5090 and RTX 5080 GPUs later this week, generating significant consumer demand—with people even braving cold weather to camp outside stores.
