Posted on 01/27/2025 6:50:46 AM PST by Red Badger
Key Points
* U.S. technology firms like Nvidia plunged, as Chinese startup DeepSeek sparked concerns over competitiveness in AI and America’s lead in the sector, triggering a global sell-off.
* DeepSeek launched a free, open-source large language model in late December, claiming it was developed in just two months at a cost of under $6 million.
* These developments have bolstered questions about the large amounts of money big tech companies have been investing in artificial intelligence models and data centers.
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Nvidia and other U.S. technology firms plunged on Monday, part of a global sell-off as Chinese startup DeepSeek sparked concerns over competitiveness in artificial intelligence and America’s leadership in the sector.
Nvidia, the chip designer who has been a major beneficiary of the AI hype, slid around 11%. With that, the megacap tech stock was on track to notch its worst day since March 2020.
Other AI trades like Micron and Arm Holdings dropped more than 8% and 9%, respectively. Broadcom and Advanced Micro Devices lost more than 14% and 5%, respectively.
Constellation Energy and Vistra , two of the best-known derivative plays tied to the power buildout for AI, plummeted about more than 12% and 19%, respectively.
International markets also felt the impacts. Netherlands-based chip companies ASML and ASM International both pulled back sharply in European trading. In Asia, Japanese chip-related stocks including Advantest and Tokyo Electron were broadly lower.
DeepSeek launched a free, open-source large language model in late December, claiming it was developed in just two months at a cost of under $6 million — a much smaller expense than the one called for by Western counterparts. Last week, the company released a reasoning model that also reportedly outperformed OpenAI’s latest in many third-party tests.
In a social media post, Marc Andreesen called DeepSeek’s product “one of the most amazing and impressive breakthroughs I’ve ever seen” and a “profound gift to the world.” The Andreessen Horowitz cofounder recently gained notoriety for his support of President Donald Trump.
These developments have stoked concerns about the amount of money big tech companies have been investing in AI models and data centers, and raised alarm that the U.S. is not leading the sector as much as previously believed.
“DeepSeek clearly doesn’t have access to as much compute as U.S. hyperscalers and somehow managed to develop a model that appears highly competitive,” said Srini Pajjuri, semiconductor analyst at Raymond James, in a Monday note.
Pajjuri said DeepSeek could “drive even more urgency among U.S. hyperscalers,” a group of large computing infrastructure players like Amazon and Microsoft . Specifically, the analyst said these companies can leverage their advantage from access to graphics processing units to set themselves apart from cheaper options.
GPUs are a key part of the infrastructure required to train huge AI models. Nvidia is the market leader in GPUs.
The cost of computing has become a key topic of conversation following the DeepSeek news, according to Citi analysts.
While the dominance of U.S. companies on the most advanced AI models may be threatened, they said, a key barrier for competitors is access to the best chips. Because of this, leading AI companies likely won’t move away from the more-advanced GPUs, the analysts said.
Last week’s announcement of the $500 billion Stargate AI project is a “nod to the need for advanced chips,” they added.
To be sure, Bernstein analysts expressed doubt over whether the DeepSeek tool was actually built for less than $6 million. They questioned if that figure left out other costs from prior research and experiments to get the technology to where it is today.
Despite stressing that DeepSeek’s models “look fantastic,” the team said they shouldn’t be thought of as “miracles.” And panic about the “death-knell of the AI infrastructure complex as we know it,” the Bernstein analysts said, was “overblown.”
PING!.....................
If it is TRULY open-source (with the Chi-Coms there is ALWAYS a question) then this is a big deal. I have my doubts.
later
great buying opportunity, China lies about everything and steals everything.
claiming it was developed in just two months at a cost of under $6 million
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Anybody can claim anything. AI development efforts here may be costly but this “on the cheap” claim needs to be substantiated. If true, it could be a game changer, but such claims need to be verified.
“Nvidia plummets 11%”
That is hilarious. NVDA 1 year total return is 132%!
I’m not a bit surprised. AI is to the point where businessmen have taken over and like any tech heavy industry once a technology is marketed it advancement freezes to reap profits.
Woo, that’s ugly! Around the new year I got entirely in cash and locked in great gains, including from NVDA — but then it climbed up very nicely and I had a sad at the gains I missed. Until now. :^o
I agree. Big Tech should not assume that there is truth to this, because China may have said so to slow down Western companies.
Caveat emptor................
That’s an interesting thought. With Trump just stepping into office the timing is particularly suspect.
Has any of this been verified or did the sheep just hit panic mode on marketing hype?
Likely to be shown as smoke and mirrors. The Chinese lie. And when they aren’t lying they’re just flat out making sh*t up.
CC
The stock market is essentially Las Vegas for the wealthy. They see a danger and flee like roaches when the light comes on...........
Everything China produces is absolute garbage. They spend more money on wrapping everything they produce in propaganda than they do in actual production.
Like I posted on the other thread;
Dumb thing about his is that Deepseek has 50k NVDA H100s. So they aren’t doing AI on the cheap, it’s not a low cost break though.
https://x.com/Banana3Stocks/status/1883784700566949986
https://x.com/TheTranscript_/status/1883097008900358262
What is scary is the numbers of people that are intentionally downloading and installing the Chinese spy-ware on their computers and smart phones.....................
“...The stock market is essentially Las Vegas for the wealthy. They see a danger and flee like roaches when the light comes on...........”
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Could we assume that Las Vegas is the stock market for the poor?
I own stocks, bonds and index/mutual funds and I’m not wealthy. I do however understand that the NYSE is a fickle institution. It’s not a place that will make one, or at least most of us, wealthy overnight. Maybe I should book a flight to Vegas?
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