China's AI 'DeepSeek' shock causes panic selling of tech stocks, NVIDIA's market capitalization wipes out 91 trillion yen, more than doubling its previous record
Chinese AI company DeepSeek released the open source model 'DeepSeek-R1' equivalent to OpenAI o1 in January 2025, raising concerns about the rise of Chinese-made AI, and NVIDIA's stock price temporarily plummeted by about 17%, causing the company's market capitalization to fall by $588.8 billion (about 91 trillion yen). This is reportedly the largest market capitalization ever lost in a single day.
DeepSeek panic triggers tech stock sell-off as Chinese AI tops App Store - Ars Technica
Nvidia drops nearly 17% as China's cheaper AI model DeepSeek sparks global tech sell-off
https://www.cnbc.com/2025/01/27/nvidia-falls-10percent-in-premarket-trading-as-chinas-deepseek-triggers-global-tech-sell-off.html
A shocking Chinese AI advancement called DeepSeek is sending US stocks plunging | CNN Business
https://edition.cnn.com/2025/01/27/tech/deepseek-stocks-ai-china/index.html
On January 20, 2025, DeepSeek released 'DeepSeek R1,' which is comparable to OpenAI's o1, an open source model that anyone can download for free, but which requires paying $20 (about 3,000 yen) per month to access.
Chinese AI company releases 'DeepSeek R1', an inference model equivalent to OpenAI o1, under the MIT license that allows commercial use and modification - GIGAZINE
According to IT news site Ars Technica, it is not that surprising that 'R1' has come so close to o1 in the inference benchmark. This is because there are already models comparable to o1, such as Google's ' Gemini 2.0 Flash Thinking ', and OpenAI itself plans to release 'o3' soon, which will outperform o1.
AI experts were surprised by R1 for three reasons. First, DeepSeek, which does not have access to cutting-edge GPUs due to U.S. export restrictions, trained R1 for just about $6 million using NVIDIA H800 chips, a low-performance chip for China. This cost is only about 3% of the training cost of O1, as some reports have revealed.
Second, R1 came just four months after OpenAI announced o1 in September 2024. And third, and perhaps most important, DeepSeek released the weights of the R1 model for free under an open MIT license, meaning that anyone can download it, run it, and tweak it, unlike closed models like ChatGPT.
These features have made R1 an instant hit in the AI community, leading it to overtake ChatGPT as the top free app in the iPhone App Store.
App Store Ranking (iPhone) - Apple (JP)
https://apps.apple.com/jp/charts/iphone
The impact of the R1's appearance, which has been
The stock price decline wiped out $588.8 billion in NVIDIA's market capitalization, more than double the $240 billion (about 37.27 trillion yen) recorded by Meta in 2022, making it the company's worst loss ever.
The fall of NVIDIA, which had been the sole chip maker in the AI accelerator market, led to a wide range of stocks being sold off, with the Nasdaq, which is dominated by tech stocks, falling 3.1% and the S&P 500 Index also falling 1.5%. Major tech stocks that fell along with the market included Micron, whose stock price fell 11%, Arm, which fell 10%, Broadcom, which fell 17%, and AMD, which fell 6%.
The shock also spread to non-technology companies, and energy-related stocks, whose stock prices had soared due to the supply of electricity to AI data centers, also fell across the board. For example, shares of Constellation Energy, which is aiming to restart the Three Mile Island nuclear power plant to supply electricity for AI, fell 21% on January 27, while competitors Vistra and GE Vernova also recorded declines of 28% and 21%, respectively. In addition, futures prices for natural gas, which powers generators, fell 5.9%, and oil fell by more than 2%.
Regarding the stock market turmoil, Michael Block, a market strategist at investment firm Third Seven Capital, said, 'Time will tell if the DeepSeek threat is real. The race is on over which technology will work and how major Western companies will respond and evolve.' He added, 'The market may have been too complacent with the start of Trump Administration 2.0 and was looking for an excuse to fall. Now, the perfect excuse has been found.'
On the other hand, there are also calm voices about whether DeepSeek really threatens to shake the West's dominance in the field of AI. An analyst at investment firm AllianceBernstein told CNBC, 'DeepSeek's model is impressive, but it's not miraculous. Panic about it being a death knell for the AI infrastructure complex as we know it is overblown.'
Ars Technica also said, 'The emergence of cheap, open-source AI models that rival the best commercial models in the U.S. is a genuine threat to closed-source AI companies, but it's not surprising to anyone who has watched AI advance so quickly. The history of computing is replete with examples of information technologies becoming cheaper, more compact, commoditized, and then absorbed into larger products.'
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