China's Cheap AI Is Making America's Tech Giants Fall

The new AI assistant from DeepSeek has investors questioning whether too much money is needed for AI research, and the stock prices of many tech companies have since fallen.

Illustration of potential competition between DeepSeek and ChatGPT - Photo: REUTERS

Last weekend, Chinese startup DeepSeek launched a free artificial intelligence (AI) assistant that is comparable in features to American rivals like OpenAI and Meta.

DeepSeek also introduced this AI model using much cheaper chips and cost less, only about 6 million USD. This information immediately raised doubts about the claims of spending hundreds of billions of USD on AI models of other technology giants.

According to Reuters, the problem is not just for technology companies, because investors believe that training AI models will have an impact on the entire supply chain, from chip manufacturers to data centers.

In the US, shares of Nvidia, whose chips are a leading choice for powering AI applications, fell 12.3% in premarket trading. The Financial Times predicted that the stock’s decline could cost Nvidia as much as $300 billion in market value because of DeepSeek.

Other chipmakers such as Broadcom and Micron Technology saw their shares fall 14.3% and 8.4%, respectively. Alphabet, Google's parent company, fell 4.6% while Apple fell 0.4%.

Shares of AI server makers Dell Technologies and Super Micro Computer fell 8.8% and 10%, respectively. Also in the U.S., shares of utilities expected to see a surge in demand from AI data centers fell, with Constellation Energy, Vistra and GE Vernova falling between 12.8% and 16.1%.

In Europe, chip equipment maker ASML fell 11.5% to its lowest in nearly nine weeks, while ASM International fell more than 15%. Siemens Energy, which supplies power hardware for AI infrastructure, fell 17.4% to the bottom of the STOXX 600.

"If such a cheap AI model suddenly appears, there will certainly be concerns about the profitability of other rival companies that have invested in more expensive AI infrastructure," said Fiona Cincotta, market analyst at City Index, to Reuters.

DeepSeek's AI assistant has surpassed rival ChatGPT to become the highest-rated free app available on Apple's App Store in the U.S. However, some market analysts say it's too early to judge DeepSeek as a major threat to other U.S. AI model companies.

What kind of company is DeepSeek?

DeepSeek was founded in 2023 and is pursuing open-source AI model development. The company's latest product, R1, claims to be able to deliver performance on par with OpenAI's latest release.

DeepSeek also licenses it to individuals interested in developing chatbots based on R1. However, like all other Chinese AI models, DeepSeek self-censors topics considered sensitive in China.

In tests, DeepSeek's AI assistant was able to give detailed responses about political figures like Indian Prime Minister Narendra Modi, but refused to do so when asked about Chinese President Xi Jinping.

DeepSeek's cloud infrastructure is likely to be tested by its sudden popularity, and it just suffered a major outage on January 27.

Source: https://tuoitre.vn/ai-gia-re-cua-trung-quoc-khien-cac-ong-lon-cong-nghe-my-suy-sup-20250127211617575.htm