DeepSeek, a Chinese AI startup, has set the AI industry abuzz with the release of its ground-breaking R1 model.
Unveiled on Friday, R1 has drawn widespread attention for its impressive functionality and accuracy, rivalling U.S.-based counterparts while using fewer resources and less computational power. While this milestone is undoubtedly a win for the global AI community, it has sparked significant repercussions for certain stakeholders—most notably Nvidia.
The semiconductor giant is reeling in the wake of DeepSeek’s announcement. According to Yahoo Finance data, Nvidia’s stock plummeted 16.9% between the close of Friday’s public markets and the close on Monday. This sharp decline wiped nearly $600 billion off Nvidia’s market capitalization. The stock, which closed at $142.62 per share on Friday, dropped to $118.58 by Monday afternoon.
Industry experts speculate that DeepSeek’s achievement could fundamentally challenge Nvidia’s business model. R1’s success underscores the possibility of creating advanced AI models without relying on expensive, high-performance chips, a development that poses a direct threat to Nvidia’s dominance in the AI hardware sector.
“DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling,” an Nvidia spokesperson told TechCrunch via email. “DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely available models and compute that is fully export control compliant. Inference requires significant numbers of Nvidia GPUs and high-performance networking. We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling.”
The timing of DeepSeek’s release adds another layer of complexity. Just a week earlier, former U.S. President Joe Biden had signed an executive order imposing stricter controls on the export of advanced AI chips to countries like China, where DeepSeek is headquartered. Nvidia criticized the move as “unprecedented and misguided,” arguing that such restrictions would stifle innovation and hinder global economic growth.
In a surprising twist, President Donald Trump recently reversed Biden’s executive order and introduced the Stargate Project, a $500 billion infrastructure initiative aimed at building state-of-the-art AI data centres. While this program underscores the U.S. government’s commitment to maintaining a competitive edge in AI, the release of DeepSeek’s R1 model serves as a stark reminder that dominance in the global AI market requires more than just hardware advancements.
Main Image: CTech
