Donald Trump has called China's new AI model, DeepSeek, a "wake-up call" for the U.S. tech industry, following a near-$600 billion drop in Nvidia's market value. DeepSeek's emergence triggered a sharp decline in AI-related stocks. Nvidia, a key player in AI GPU technology, suffered the most significant loss, with a 16.86% share drop—a record on Wall Street. Microsoft, Meta, Alphabet, and Dell Technologies also experienced declines ranging from 2.1% to 8.7%.
DeepSeek claims its R1 model offers a significantly cheaper alternative to Western AI models like ChatGPT. Built on the open-source DeepSeek-V3, it reportedly requires less computing power and had an estimated training cost of just $6 million. While this claim is disputed by some, it has raised concerns about the billions invested by American tech companies in AI, unnerving investors. DeepSeek's popularity surged, topping U.S. free app download charts amidst growing discussions about its effectiveness.
"DeepSeek performs as well as leading Silicon Valley models and, according to their claims, even better," Sheldon Fernandez, co-founder of DarwinAI, told CBC News. "But they achieved this with a fraction of the resources, which is turning heads in our industry. Instead of paying OpenAI $20 or $200 monthly for advanced models, people can get similar features for free. This fundamentally disrupts the business models many companies relied on to justify their high valuations."
President Trump, however, offered a more optimistic perspective, suggesting DeepSeek could be beneficial for the U.S. "Instead of spending billions and billions, you'll spend less and hopefully achieve the same solution," he said, as reported by the BBC. "If you can do it cheaper and get the same result, that's good for us," Trump added, maintaining that the U.S. will retain its AI dominance.
Despite the impact of DeepSeek, Nvidia remains a $2.90 trillion company. The company is poised to release its highly anticipated RTX 5090 and RTX 5080 GPUs later this week, generating significant consumer demand, with people even braving cold weather to camp outside stores.
