DeepSeek, the most recent participant in the AI arena, has taken Silicon Valley by storm. Its huge capabilities outstrip competitors such as Google’s Gemini, Open AI’s ChatGPT, and Meta AI’s Llama.
According to the Chinese AI firm, its DeepSeek-R1 model produces outcomes that are on par with OpenAI’s o1 model. With an astounding 97% success rate, it occasionally even beats OpenAI’s o1. Surprisingly, it accomplishes all of this for 95% less money than OpenAI’s O1.
In recent years, established firms like Google, Meta, and NVIDIA have seen extraordinary expansion, generating substantial wealth for investors. However, investor confidence has worsened since DeepSeek’s introduction.
The tech-heavy index, NASDAQ futures, had an almost 400-point decline in trading on Monday morning. Additionally, the overnight rates point to a 5% decline in the price of NVIDIA shares.
To appreciate this further, it’s crucial to recognize the function that NVIDIA plays in the AI sector.
What led to the rise of NVIDIA?
The creation of Compute Unified Design Architecture (CUDA) programming is what gives NVIDIA a competitive edge. GPUs like NVIDIA’s H100 can handle complicated data and compute difficult mathematical problems at the same time when CUDA programming is employed. As a result, demand for the H100 GPU, which is now the foundation of every AI model, has skyrocketed.
With a $4 trillion market capitalization in 2024, a firm that was worth $145 billion in 2022 is now among the most valuable. Profits increased from $9 billion to $30 billion for the same time period, while revenue increased from $26 billion in 2022 to nearly $60 billion in 2024. The AI wave has been propelled by the stock price’s roughly 2,165% increase over the last five years. According to research studies and media sources, NVIDIA has a roughly 70% market share in the GPU industry.
What is DeepSeek and how does it affect NVIDIA?
A Chinese AI start-up called DeepSeek has advanced AI efficiency and capabilities significantly. The dominance of Big Tech firms like Microsoft, Google, Open AI, and Meta has been contested by its models.
The remarkable thing is that it has accomplished this with a far smaller workforce—nearly 220 employees—than Open AI, which employs around 4,500 people, and with a pitiful investment of only $50 million. Instead of using the newest H100 GPUs that every IT business is now splurging on, the accomplishment is accomplished using the older H800 GPUs. With its restrictions on state-of-the-art GPUs, the corporation hopes to reach new heights and undermine the effectiveness of US tech import prohibitions.
How does this impact global markets?
With promises to invest $500 billion in AI, Silicon Valley has already been rocked by DeepSeek’s success. Over the last three years, US markets have had a notable upswing, driven mostly by IT companies. Tech companies, which have risen several times since DeepSeek’s launch, are now facing the pressure of fresh competition.
As a preliminary reaction to DeepSeek’s achievement, the stock prices of chip makers such as NVIDIA, Broadcom, Super Micro, Qualcomm, AMD, and Intel saw significant declines in the overnight market, trading close to 5% down.
At Monday’s open, the tech-heavy index NASDAQ futures dropped around 400 points and are in danger of wiping off $1 trillion in market value. In a similar vein, Indian IT firms TCS, Infosys, Tech Mahindra, and HCL Technologies saw a 2% to 2.5% decline Monday morning, following the lead of international markets.
Since tech stocks drove the most recent advance in US markets on excitement about AI and its potential, the rise of DeepSeek is predicted to alter the dynamics of geopolitics and global markets. China currently has the upper hand in talks with the US in the looming trade war and the bans on its imports of the newest technologies appear to be less effective. Following the sharp increase in the share prices of firms such as NVIDIA, investors and market analysts indicate that tech stocks are cooling off after entering a bubble.
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