Deepseek, the Newest AI Sweeping the World
Thaddius Gamueda
Staff Writer
DeepSeek, the Newest AI Sweeping the World
The Space Race of the mid-20th century saw two world superpowers, the USSR and the United States vying for control of the stars. As the USSR sent the Sputnik into orbit on October 4th, 1957, it led to one of the most turbulent times in history. Technological advances ran rampant and many events during this time have had lasting impacts that can be felt today. This week we had a Sputnik moment in the Artificial Intelligence sector according to Marc Andreessen, an influential Silicon Valley venture capitalist. DeepSeek, a Chinese based generative AI (GenAI) was created for a record breaking $6 million dollars. According to Forbes, Gemini and ChatGPT have been stated to cost at least $39 million to more than $100 million dollars to train. Now, the biggest question on every investor’s mind is: What is DeepSeek, and how does this development affect the outlook for AI and the market?
What Makes DeepSeek Different?
DeepSeek was created through a Chinese hedge fund manager, Liang Wenfeng, who wanted to close the gap between China and the U.S. in AI and worked to develop solutions to close the gap. He co-founded High-Flyer, a quantitative hedge fund that uses AI to invest in stocks, and in May 2023, founded DeepSeek. DeepSeek is an open-source model where it aims to capitalize on user input to train itself. This differs from OpenAI’s ChatGPT, which is closed source, where only developers at OpenAI can develop the software. DeepSeek R1 is also an advanced reasoning AI; it mimics high level thinking comparable to human abilities. It is also said to rival OpenAI’s advanced reasoning AI, ChatGPT o1, and users can access it at a fraction of the cost. Before the sanctions that were put into place by the Biden administration to restrict NVIDIA from selling top of the line chips to China, Wenfeng purchased thousands of H800 chips for this project. When R1 was made public, it was stated that it took less than $6 million to develop the AI. A spectacularly smaller number compared to what tech giants like Meta and Google are putting in to develop their AI’s. Although the true amount cannot be specified, analysts believe now the AI technology can be developed for far less than what tech giants are paying today, significantly discounting their past AI CapEx activity. Because DeepSeek was created off slower chips, NVIDIA’s stock tanked on January 27th. Companies and investors are wondering as of now if NVIDIA’s present chips are truly needed to create competitive AI models for the future.
Record Breaking Loses and Earnings for the Technology Sector
After the launch of DeepSeek’s R1 chatbot, on January 27th, 2025, NVIDIA dropped by 17%, culminating in a $589 billion loss in one day. This record setting number has never been seen before and all-American based tech stocks felt the impacts, as in total, $1 trillion was lost in a single day. Much of this can be brought up to the sky-high expectations placed on AI and U.S. tech companies. As the week went on, however, the tech industry began to recover. Just a day after NVIDIA’s big loss, NVIDIA made a strong recovery at 8.82% and other tech companies, like Broadcom, were up 2.57% after the selloff. As of the date of this article, January 31st, the technology sector of the stock market has begun to claw back lost ground. NVIDIA’s share price has risen around $8 after the selloff on Monday. As tech stock earnings are kicking off this week, the market is anxiously waiting to see how the tech industry bounces back. Some of the more notable stocks include Apple, Meta, Palantir, and Amazon are expected to beat their forecasts.
Future of the AI Market and DeepSeek’s Role
DeepSeek truly is AI’s Sputnik moment. When Sputnik was first launched, it sent panic through America, but the positive impact this had was massive. Sputnik helped America realize where they were compared to the rest of the world and lit a fire under them. DeepSeek is going to have the same effect. Competition is meant to fight off stagnation. Being in a world where competition is at the heart of events allows for some of the greatest things to be created. For example, European countries scrambled to colonize North and South America after Christopher Columbus arrived in 1492. The British were pushed to the brink in WW2. But they worked tirelessly to decode German communications and led to Alan Turing and his team creating the first ever computer. DeepSeek is one of the most remarkable catalysts for growth that the modern world has ever seen, and it will lead to improvements in the U.S. and China. If we can create and train AI at low prices as well as push further technological development, humans will figure it out. The market is going to feel this surge of energy that has been injected into the tech giants working to find new solutions to these problems. DeepSeek shouldn’t cause investors to sell off in fears of a tech industry collapse, they should be buying at a time when tech stocks are at lows and being ready for the exciting future that awaits us.
Contact Thaddius at Thaddius.Gamueda@shu.edu