This AI just cost Google, Nvidia, Microsoft $1 trillion – Is your money at risk?
Chinese chatbot DeepSeek has shocked the AI world and sent tech stocks tumbling.
The artificial intelligence arms race has moved up a gear after the launch today of the Chinese AI bot DeepSeek.
A competitor to OpenAI and other US artificial intelligence companies, DeepSeek appeared to demonstrate the same level of performance to the leading US AIs but with much fewer resources.
As a result of the shock launch, the Nasdaq Composite fell 3.1%, with US$1 trillion wiped from the popular tech-focused index.
Nvidia (NASDAQ: NVDA) took the biggest hit, dropping 17% and losing its status as the world's most valuable publicly-listed company in the process.
The chipmaker has been arguably the biggest beneficiary of the AI boom, with its computer chips powering most of the world's leading AI models.
It saw its market value plummet by US$600 billion, the biggest single drop in US stock market history.
Alphabet (NASDAQ: GOOGL), the parent company of Google, also saw US$100 billion shaved off its valuation.
The reason for DeepSeek's disruptive debut is that it appears to have achieved the same results as ChatGPT and other AI models whilst using fewer chips.
This means it is a lot cheaper to train and run than the more computationally-intensive US models.
It throws into question the huge money that is being thrown at US AI companies, including president Donald Trump's recent announcement of a US$500 billion AI funding project, known as "Stargate".
Trump called the release of DeepSeek a "wake up call" for US companies, but said the cheaper costs promised by DeepSeek's model was a positive.
Thankfully for Nvidia and other bluechip tech stocks, the "black swan" nature of DeepSeek's surprise launch is unlikely to be a regular occurrence.
But it does raise doubts over the US's purported AI supremacy and the long-term sustainability of an AI boom that has seen tech stocks surge despite ongoing inflationary issues and uncertainty in the global economy.
And with Australian super funds increasingly leaning on the big US stocks in the search for better returns, it does mean our collective super balances are likely to have also taken a decent hit off the news.
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