In late January 2025, the launch of the Chinese chatbot DeepSeek sent shockwaves through the American stock market. The developers claimed to have created an artificial intelligence model that matched leading competitors but at a fraction of the cost, with training expenses reportedly amounting to just $5.6 million compared to hundreds of millions spent by Western firms. This revelation led to a catastrophic drop in the market capitalization of major tech companies, which plummeted nearly a trillion dollars in a single day. Nvidia was hit hardest, losing close to $600 billion, marking the largest drop in U.S. stock market history.
DeepSeek's initial application, released in early January 2025, rapidly rose to the top of the free applications chart in various countries. It utilized the DeepSeek R1 reasoning model, based on the universal language model DeepSeek V3. Investors were not merely surprised by the chatbot's unexpected popularity; they were alarmed by the implications of a cheaper and faster AI development process that could potentially disrupt the established tech landscape.
Despite the initial frenzy, DeepSeek's unique selling proposition was its efficiency. The startup claimed to have trained its model using only 2,000 chips, a significant reduction compared to the 16,000 typically employed by industry leaders. This efficiency allowed for a quicker training period of just a few months, far exceeding the timelines of American competitors.
However, the excitement surrounding DeepSeek has waned over the past year. Currently, the chatbot has lost its status as a top app, with no presence in the top 25 free apps across various App Stores, including China. In fact, it only ranks within the top ten in the Russian App Store, where it faces limited competition due to the unavailability of other popular AI applications like ChatGPT and Gemini.
Meanwhile, the companies that suffered from the initial stock market panic have largely recovered. Nvidia, which once faced devastating losses, is now the world's most valuable company with a market capitalization of $4.6 trillion. Other AI developers have also seen significant rebounds, with Alphabet's market value rising by $1.6 trillion since its 2025 plunge.
Investors now acknowledge that the initial excitement over DeepSeek may have been overblown. The realization that Nvidia and other companies continue to thrive has prompted a reevaluation of the market's response to DeepSeek. The paradoxical effect of DeepSeek's popularity has ultimately fueled renewed interest and investment in artificial intelligence, leading to an increase in data center construction and overall market confidence.
As the market stabilizes, competitors are reminded of the challenges they face from innovative newcomers and the need to maintain their competitive edge to avoid being overshadowed.
Informational material. 18+.
