DeepSeek, a Chinese AI startup, became the talk of the proverbial AI town when it released its R1 model on Friday. R1’s functionality and accuracy compared to its U.S. counterparts, despite using fewer resources and less compute power, seems like a win for the overall AI industry. But it isn’t necessarily good news for everyone.
Semiconductor giant Nvidia finds itself in the headwinds of DeepSeek’s recent achievement. The chip giant saw its stock plummet 16.9% from the close of Friday’s public markets to the close of public markets on Monday, according to Yahoo Finance data. Nvidia lost nearly $600 billion off of its market cap. Nvidia’s stock closed at $142.62 a share on Friday afternoon. On Monday, it closed at $118.58.
There is speculation that the reason why DeepSeek’s model release would impact Nvidia’s stock is that R1 provides a clear example that AI models don’t necessarily need expensive, high-end chips or hardware to build an impressive model, which isn’t exactly great news for a chipmaker like Nvidia.
“DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling,” an Nvidia spokesperson told TechCrunch over email. “DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant. Inference requires significant numbers of Nvidia GPUs and high-performance networking. We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling.”
The timing of all of this is interesting because this comes one week after former president Joe Biden signed an executive order that made further restrictions on the export of U.S.-produced advanced AI chips to certain countries, with near-blanket restrictions on sending chips to countries like China, where DeepSeek is based.
At the time, Nvidia said that the executive order was “unprecedented and misguided” and that it would “derail” innovation and economic growth worldwide.
President Donald Trump has since reversed Biden’s executive order and has signed a different executive order to create the Stargate Project, an infrastructure program that will invest up to $500 billion into AI data centers.
The release of DeepSeek shows that if the U.S. wants dominance over the global AI market, it may need to pay attention to more than just chips and AI hardware.
Hey, I am a multifaceted professional excelling in the realms of blogging, YouTube content creation, and entrepreneurship.
With a passion for sharing knowledge and inspiring others, I established a strong presence in the digital sphere through his captivating blog articles and engaging video content.