How DeepSeek's Technology Could Impact Tech Stocks
On January 20, DeepSeek shook the US tech sector by launching a cost-efficient model DeepSeek-R1, that rivals top American AI competition systems, triggering a historic stock market plunge.
The sudden rise of DeepSeek-R1 in the generative AI competitive landscape has amplified fears that US AI firms will struggle to compete, while companies like OpenAI and Google invest billions into developing AI, the DeepSeek’s low-cost success pressed a tectonic shift in the industry.
Now, investors are asking if expensive hardware-dependent AI models can survive against China’s far more streamlined, software-optimized approach.
The competitive intelligence generative AI breakthrough really threatens the leadership of US firms in this area, and it foreshadows an essential reorientation of AI economics, setting in train a very different era for global AI rivalry.
Generative AI Competitive Intelligence
Founded in May of 2023, DeepSeek became an interesting challenger for the big brains in AI space. On 20th January, its recent model, DeepSeek-R1, performed at par with some tests when juxtaposed against O1 of OpenAI. What is unique about AI as a competitive advantage of Deep Seek is the cost this model bears.
Although OpenAI CEO Sam Altman estimates GPT-4 cost upwards of over $100 million, DeepSeek is accelerating competitive advantage with AI its figure for creating the model at two months and $6 million. Its drastically lower costs come courtesy of optimizations driven via software rather than through the expensive hardware itself.
Despite the generative AI competition and the US chip export restrictions imposed in 2022-which blocked sales of advanced Nvidia AI chips to China-DeepSeek adapted by optimizing data processing and memory management to achieve efficiency comparable to leading US models.
That greatly cuts the cost of AI processing. DeepSeek-R1 only charges 55 cents per million input tokens, while OpenAI charges $15 million-a very dramatic 27-fold difference in price.
Market and Investor Concerns
DeepSeek’s rise has already sent shockwaves into US tech stocks creating room for more AI competition. For one, Nvidia’s stock plunged 17% in a single day of trading, shedding US$590 billion from its market value in the largest one-day loss in stock market history.
Other AI-related stocks such as Marvell Technology, Broadcom, Micron, and Oracle lost double digits as well. The question of whether the US’s capital-intensive way of business in AI doing remains viable pitted against the more cost-efficient ways from across the Pacific is begged.
Adding to the pressure, the generative AI for competitive intelligence for DeepSeek’s mobile app has surpassed OpenAI’s ChatGPT as the most downloaded free app on Apple’s App Store, signaling a shift in consumer preference. As US AI companies scramble to respond, the key question is whether they can maintain their lead, securing AI and competitive advantage of the company, or has DeepSeek set a new standard for AI competition development?
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