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, following a significant drop in Nvidia's market value. The launch of DeepSeek triggered a sharp decline in stocks of companies heavily invested in AI, with Nvidia experiencing the most substantial loss in Wall Street history—a 16.86% tumble in its share price. Other tech giants like Microsoft, Meta Platforms, and Alphabet saw their stocks fall between 2.1% and 4.2%, while Dell Technologies, a key AI server manufacturer, dropped by 8.7%.
DeepSeek has sent shockwaves throughout the AI gold rush. Photo by NICOLAS TUCAT/AFP via Getty Images.
DeepSeek claims its R1 model offers a significantly more affordable alternative to Western AI models like ChatGPT. Built on the open-source DeepSeek-V3, it reportedly requires much less computing power and was trained at a cost of just $6 million. Although some dispute these claims, DeepSeek's emergence has prompted questions about the billions American tech companies are pouring into AI, leading to investor jitters. The model quickly rose to the top of the most downloaded free app chart in the U.S., fueled by discussions about its effectiveness.
Sheldon Fernandez, co-founder of DarwinAI, commented 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's turning heads in our industry. Instead of paying OpenAI $20 or $200 a month for the latest advanced versions of these models, people can get these types of features for free. This really upends the business model that many of these companies were relying on to justify their high valuations."
Despite the market turmoil, President Trump suggested that DeepSeek could be "a positive" for the U.S. He stated, as reported by the BBC, "Instead of spending billions and billions, you'll spend less and you'll come up with hopefully the same solution. 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." Trump also expressed confidence that the U.S. would continue to lead in AI development.
Despite the impact of DeepSeek, Nvidia remains a formidable player with a market value of $2.90 trillion. The company is gearing up to release the highly anticipated RTX 5090 and RTX 5080 GPUs later this week, with enthusiasts braving the January cold to camp outside stores in anticipation.
