China’s DeepSeek turns AI on its head, with US tech stocks on track to lose $1 trillion in value
Nvidia could shed more than $350 billion today, as DeepSeek outscores OpenAI models on some measures.
Despite only being founded in 2023 and reportedly using inferior chips at a fraction of the cost of many of its competitors, Chinese AI lab DeepSeek released the R1 last week — a model that goes toe to toe with some of the biggest names in AI.
Its hardware efficiency, coupled with the fact that it’s free to use and open-source, is a potent cocktail that’s spooked the technology world over the weekend. DeepSeek’s output challenges the “spend billions to accelerate AI progress” narrative, and is sending stocks like Nvidia, Broadcom, and Microsoft plummeting in premarket trading — threatening to wipe as much as $1 trillion off America’s top tech names.
DeepTrouble
Indeed, the weekend buzz around the large language model — the fact that it “thinks” before it speaks, shows its workings, and matches OpenAI’s most powerful model, the o1, on a range of metrics — seems to have left much of Silicon Valley wowed and worried, in almost equal measure.
Per DeepSeek’s own figures, the R1 model outperforms the OpenAI o1 on a variety of key tests, shining particularly brightly in math, where it beats the latest model from Sam Altman’s company on three different tests. While it’s less consistent on coding and language tests — it fared particularly badly on the “SimpleQA” (not shown in chart above), a test evaluating the simple factual accuracy of the info that LLMs spit out — the differences are fairly slim, making the cost-effective R1 look impressive.
The Chinese company’s slimmed-down training costs, use of cheaper chips, API, and open-source model have hauled the endless drive for more chips and compute that’s driven much of the market for the last 18 months into question. Meta, for example, is planning to spend more than $60 billion on capital expenditures just this year.
At a time when people are wondering if we can trust TikTok due to Chinese government ties, many have similar questions about DeepSeek. Tech evangelist Marc Andreessen was among those singing R1’s praises over the last few days — though he may not have asked it about Tiananmen Square yet.
