The impact of the new Chinese AI app DeepSeek has had on the technology sector, the markets, and the bullish sense of American superiority in the field of artificial intelligence ( AI ) has been nothing short of astonishing.
Venture capitalist Marc Andreessen might have been saying it finest. ” DeepSeek-R1 is AI’s Sputnik time”, he posted to X on Sunday, referring to the telescope which kicked off the space race.
Over the weekend, DeepSeek was the most popular free apps on Apple’s US App Store. By Monday, the new AI bot had sparked a significant sell-off of significant technology companies that were in decline as fears grew about America’s position as the sector’s leader.
Shares of AI chip designer and recent Wall Street darling Nvidia, for example, had plunged by 17% by the time US markets closed on Monday. Or to put it in even starker terms, it lost nearly $600bn in market value which, according to Bloomberg, is the biggest drop in the history of the US stock market.
This remarkable, ancient spooking is largely been attributed to something as simple as price. And a state made by DeepSeek’s designers that raised serious questions in Silicon Valley.
While ChatGPT-maker OpenAI has been causing haemorrhaging money, spending only$ 5 billion in the last year, DeepSeek’s developers claim to have created the most recent model for only$ 5.6 million.
That is only a fraction of the cost used by Artificial companies like OpenAI, Google, and Anthropic to create their own designs.
There was a palpable solitude in several corners of Silicon Valley as this extraordinary moment for the field unfolded when I contacted those who are typically content to speak. Some observers, traders, and experts appeared stunned.
Some wondered if this marked a purchasing opportunity. Some people questioned the data DeepSeek was providing.
Veteran analyst Gene Munster told me on Monday,” I also believe the truth is beneath the surface when it comes to basically what’s going on.” He questioned the financial statements provided by DeepSeek, and if the startup’s figures were accurate or whether it was being subtracted.
The robot is” remarkably fine, which only makes it hard to believe”, he said.
Regardless, DeepSeek’s unexpected appearance is a “flex” by China and a “black gaze for US tech”, to use his own thoughts.
After all, it was only last week that Oracle’s Larry Ellison and OpenAI’s Sam Altman held a press event that had a real chance of being a press release.
The occasion represented top National optimism regarding AI.
They announced Stargate, a joint venture that promises up to$ 500bn in private investment for AI infrastructure: data centres in Texas and beyond, along with a promised 100, 000 new jobs.
Despite China’s supremacy of rare-earth metals and engineering ability, the US appeared to believe that its numerous data centers and power over the highest-end chips gave it a dominant edge in AI.
Some have even seen it as a foregone conclusion that America would dominate the AI race, despite some high-profile warnings from top executives who said the country’s advantages should not be taken for granted.
There is a feeling that DeepSeek has lost some of that swagger, though the US may still go on to continue to rule the industry.
Trump likely found comfort in the likes of Altman and Ellison when they described the Chinese application’s rapid emergence in recent days. He called this instant a “wake-up contact” for the American tech sector, and said finding a way to do cheaper AI is finally a” great thing”.
Additionally, it is important to point out that it wasn’t really tech companies that suffered on Monday. Shares in electricity did as well. We’ve been wronged for a long time about what it takes to develop AI because of DeepSeek’s introduction on the scene.
Maybe that nuclear renaissance – including firing up America’s Three Mile Island energy plant once again – won’t be needed. Maybe it does not take so much capital, compute, and power after all.
The future of silicon companies like Nvidia is still uncertain for the time being.
DeepSeek claims that its model was created using current technologies and open source software that anyone can use and use for free to use and share.
But WIRED reports that for years, DeepSeek founder Liang Wenfung’s hedge fund High-Flyer has been stockpiling the chips that form the backbone of AI – known as GPUs, or graphics processing units.
According to the company, its designs featured Nvidia H800 cards. US legislation restricting revenue of higher-powered cards to China may find a second-look under the new Trump presidency.
OpenAI’s Sam Altman was generally silent on X Monday. But very soon in the day, he wrote that DeepSeek was “impressive… especially around what they’re able to provide for the value”.
” We will clearly provide much better models and it’s true exhilarating to have a new competitor”! he wrote.
Sputnik was the real eve of the room time. It, too, the US was caught off guard. It will be interesting to see how the tech sector reacts to this ostensible surprise from a Chinese company, and how that may have given the Artificial race major traction.