DeepSeek’s success is a poke in the face, and top US figures are rattled.
Chinese company, DeepSeek, has sparked panic in the US tech circle. This is after claiming that it spent less than $6 million building its new and powerful AI model, DeepSeek-R1.
The result was a significant decline in US tech valuations. Tech stocks tumbled on Monday, wiping out up to half a trillion dollars. Companies like Nvidia, Microsoft, Alphabet, Oracle, and Broadcom, which have played key roles in the AI movement, all felt the blow.
According to analysts, investors have lost confidence. With DeepSeek showing that AI models can be built more efficiently, they can’t see how the spending spree on chips and data centers will continue. The world’s largest chipmaker Nvidia experienced by far the biggest loss in valuation. And for good reason: DeepSeek-R1 was built without Nvidia’s latest and most expensive chips. It was also built without Nvidia’s Cuda software platform, which was seen as vital to AI development.
Interestingly, it was the US’s tight export controls and restrictions on access to the world’s most advanced chips—produced by Nvidia—that hamstrung China and forced them to innovate. As previously reported by AI News Monitor, a hot contest has been ongoing for some time between the US and China on the subject of AI. The US is desperate to maintain global supremacy and stop its superpower rival from leveling up using artificial intelligence. AI researcher Matt Sheehan says that US restrictions on China have “essentially backed Chinese companies into a corner where they have to be far more efficient with their limited computing resources.”
DeepSeek innovated and built AI that matches the world’s current strongest model, despite having one hand tied due to US restrictions. Image credit: DeepSeek
For the US, there is more bubbling in the pot than just investors afraid of losing money. There is disappointment that, despite best efforts to stop them, China are determined to overtake the US in the AI arms race. There is an understanding that whichever country proves superior in AI technology could be the world leader for the next century.
Even more interesting is the fact that these developments come at the back of President Trump’s recent announcement of Stargate. Many felt the $500 billion AI project would solidify the US’s position as the leading country in technology and AI for the foreseeable future.
Questions will certainly arise now from various corners about whether such an investment can guarantee anything, given that DeepSeek leveled up with just over $5 million dollars. The amount is a mere fraction of the billions that OpenAI has spent so far.
Unsurprisingly, DeepSeek’s unveiling has triggered remarks from notable figures in the US that is a “Sputnik moment” and the country needs to “wake up”.
OpenAI CEO Sam Altman went on X on Monday to give some reassurance to investors in order to stabilize the stock market. But regardless of what a business executive says, US leaders must have realized by now that they need to act fast or risk falling behind.
AI News Monitor 
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