PRC Company DeepSeek AI Sparks $1T US Stock Selloff
The Facts
Chinese artificial intelligence (AI) company DeepSeek triggered a large US tech stock selloff after claiming to have developed an AI model for just $6M in two months, causing the Nasdaq to plunge more than 3% and threatening to wipe out $1T in market value.
DeepSeek's chatbot, which is free to use, surpassed OpenAI's ChatGPT to become the top free app in the Apple App Store. It claims to perform comparably in math, programming, and language reasoning to leading US models at a fraction of the cost and computing power.
US company Nvidia, the leading AI chip manufacturer, saw its shares plummet by 16.86%.
The Spin
Narrative A
DeepSeek R1's development under US sanctions showcases their ineffectiveness in curbing China's AI innovation. Despite export controls on chips, DeepSeek has not only matched but in some cases surpassed ChatGPT o1, proving that these restrictions drive efficiency and ingenuity. By optimizing limited resources, DeepSeek has democratized AI — offering powerful tools to those in both rich and poor countries.
Narrative B
The AI race is far from over, with US companies still poised to reclaim leadership. While DeepSeek is impressive, its advancements are just part of a new dynamic where innovation cycles change monthly, not yearly. US firms like Google and OpenAI retain strong research capabilities and work within a vibrant, competition-based market of competition, which will likely lead to breakthroughs not solely dependent on hardware supremacy.
