DeepSeek AI Model Raises Questions on AI Dominance
Chinese AI startup DeepSeek has sparked a stir in the tech industry, leading to concerns about the dominance of American AI companies.
Cost-Effective AI Model
DeepSeek's latest AI model has garnered attention for its ability to deliver competitive performance with less-advanced chips. This raises doubts about the high valuations of chipmakers like Nvidia, which has relied on its essential AI chips for stock growth.
Market Impact
On Monday, premarket trading saw Nvidia's shares drop by over 10%, potentially marking a significant market value loss. Nasdaq 100 futures and European tech stocks experienced downturns, with the VIX volatility index rising sharply. The combined market capitalization loss for the Nasdaq 100 and Stoxx 600 technology sub-index could reach $1.2 trillion.
Implications for AI Supply Chain
"DeepSeek proves that cost-effective AI models are feasible," said Vey-Sern Ling of Union Bancaire Privee. This could potentially disrupt investments in the entire AI supply chain, driven by large spending from hyperscalers.
Competition from China
The DeepSeek model is comparable to offerings from OpenAI and Meta Platforms. Its accessibility through Apple's App Store has earned it high user ratings for transparency. This challenges the belief that China's AI technology lags behind the US, despite trade restrictions on cutting-edge chips.
Investor Concerns
Earnings reports from major tech companies including Apple and Microsoft this week will provide a test amid concerns about slowed profit growth and inflated valuations. The Nasdaq 100's forward earnings multiple remains elevated at 27 times, above its three-year average.
Conclusion
The emergence of DeepSeek raises concerns about the dominance of American AI companies and highlights the increasing competition from China. While Nvidia and others still hold a strong position, they must remain vigilant as the AI landscape evolves rapidly.