Donald Trump has described the emergence of the new Chinese artificial intelligence model, DeepSeek, as a "wake-up call" for the U.S. tech industry. This statement comes in the wake of Nvidia experiencing a staggering $600 billion loss in market value.
The launch of DeepSeek triggered a significant downturn in the stocks of companies heavily invested in AI technology. Nvidia, a dominant force in the GPU market essential for AI operations, suffered the most with a 16.86% drop in its shares, marking the largest single-day loss in Wall Street history. Other tech giants like Microsoft, Meta Platforms, and Google's parent company Alphabet saw declines ranging from 2.1% to 4.2%, while AI server manufacturer Dell Technologies dropped by 8.7%.
DeepSeek has sent shockwaves throughout the AI gold rush. Photo by NICOLAS TUCAT/AFP via Getty Images.
DeepSeek's R1 model is touted as a cost-effective alternative to Western AI models like ChatGPT. Built on the open-source DeepSeek-V3, it reportedly requires significantly less computing power and was trained for an estimated $6 million. While some challenge these claims, DeepSeek's emergence has sparked doubts about the massive investments American tech firms are making in AI, causing investor unease. The model quickly became the most downloaded free app in the U.S., fueled by discussions about its efficiency.
Sheldon Fernandez, co-founder of DarwinAI, noted to CBC News, "[DeepSeek] performs as well as the leading models in Silicon Valley and in some cases, according to their claims, even better. But they did it with a fractional amount of the resources, which is really what is turning heads in our industry. Instead of paying OpenAI $20 a month or $200 a month for the latest advanced versions of these models, [people] can really get these types of features for free. And so it really upends a lot of the business model that a lot of these companies were relying on to justify their very high valuations."
Despite the market turmoil, President Trump offered a positive perspective on DeepSeek's impact. "Instead of spending billions and billions, you'll spend less and you'll come up with hopefully the same solution," he told the BBC. He added, "If you could do it cheaper, if you could do it [for] less [and] get to the same end result, I think that's a good thing for us," while expressing confidence in the U.S.'s continued dominance in AI technology.
Despite the setback, Nvidia remains a formidable $2.90 trillion company. It is poised to launch the highly anticipated RTX 5090 and RTX 5080 GPUs later this week, with enthusiasts eagerly waiting in line, braving the January cold to secure these new products.
