It is very amazing how quickly the new Chinese artificial intelligence (AI) program DeepSeek has upended the markets, the technology sector, and the optimistic belief that the United States is the leader in AI.
Marc Andreessen, a venture capitalist, may have put it best. He wrote on X on Sunday, “DeepSeek-R1 is AI’s Sputnik moment,” alluding to the satellite that started the space race.
Over the weekend, DeepSeek was the most downloaded free software from Apple‘s US software Store. As concerns grew over America’s dominance in the industry, the new AI chatbot caused a significant sell-off of key tech companies by Monday.
For instance, by the time US markets closed on Monday, shares of Nvidia, a recent Wall Street sensation and designer of AI chips, had fallen 17%. To put it even more starkly, its market value dropped by around $600 billion, the largest decline in US stock market history, according to Bloomberg.
Something as basic as cost is largely responsible for this exceptional, historic spooking. Additionally, DeepSeek’s inventors made a claim that raised grave concerns in Silicon Valley.
While OpenAI, the company that makes ChatGPT, has been losing money—it spent $5 billion last year alone—DeepSeek’s developers claim that they only spent $5.6 million to create this most recent model.
That is a very small portion of the expenses that have been used to create their own models by AI behemoths like OpenAI, Google, and Anthropic.
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When I reached out to people who are often happy to talk, there was a noticeable stillness in many parts of Silicon Valley as this momentous occasion for the industry unfolded. Many analysts, investors, and onlookers seemed in disbelief.
Some questioned whether this was a sign to buy. Others had doubts about the data that DeepSeek was offering.
According to seasoned analyst Gene Munster, “I still think the truth is below the surface when it comes to actually what’s going on,” on Monday. He questioned DeepSeek’s financials, wondering if the business was receiving subsidies or if the figures were accurate.
He claimed that the chatbot’s performance was “surprisingly good, which just makes it hard to believe.”
In any case, DeepSeek’s abrupt appearance is a “black eye for US tech,” to use his own words, and a “flex” by China.
Sam Altman of OpenAI and Larry Ellison of Oracle joined President Donald Trump for what could have been a press release at a news conference just last week.
The incident reflected the height of American optimism over AI.
They unveiled Stargate, a joint venture that claims to create 100,000 new jobs and up to $500 billion in private investment for AI infrastructure, including data centers in Texas and elsewhere.
Despite China’s supremacy in rare-earth metals and technical skill, the US appeared to believe it had a clear advantage in AI because of its large data centers and control over the most advanced chips.
Despite some prominent cautions from top executives that the nation’s advantages should not be taken for granted, some have even come to believe that America would win the AI race.
It’s possible that the US will continue to dominate the industry, but DeepSeek seems to have challenged some of that swagger.
For people like Altman and Ellison, Trump’s remarks following the Chinese app’s unexpected appearance in recent days were likely cold comfort. Ultimately, he added, finding a means to accomplish AI at a lower cost is a “good thing” and termed this moment a “wake-up call” for the American tech industry.
It’s also important to remember that Monday’s decline was not limited to tech firms. So did energy stocks. Many of our long-held beliefs about what it takes to create AI have been challenged by DeepSeek’s introduction to the market.
Perhaps there won’t be a need for such nuclear renaissance, which would include restarting America’s Three Mile Island power station. Perhaps less money, computation, and power are needed after all.
The future of massive semiconductor companies like Nvidia is still unknown.
According to DeepSeek, its model was created using both open source software, which is freely usable and shareable by anybody, and current technology.
However, according to WIRED, Liang Wenfung, the creator of DeepSeek, has been hoarding GPUs, or graphics processing units, the chips that make up artificial intelligence, for years at his hedge fund High-Flyer.
According to the company, its versions used Nvidia’s H800 CPUs. Under the incoming Trump administration, US policy limiting the export of more powerful semiconductors to China may be given another look.
Sam Altman of OpenAI was largely silent on X Monday. However, he wrote about DeepSeek being “impressive… particularly around what they’re able to deliver for the price” quite late in the day.
“We will obviously deliver much better models and also it’s legit invigorating to have a new competitor!” he stated.
The space age was actually brought about by Sputnik. The United States was taken by surprise there as well. It will be intriguing to see how its tech industry reacts to this seeming surprise from a Chinese business, which could have significantly accelerated the AI race.
