DeepSeek Storm.

DeepSeek, with its breakthrough AI models, including the DeepSeek-R1, has demonstrated that powerful language models can be developed at a significantly lower cost than existing ones, such as OpenAI’s ChatGPT and Google’s Gemini. DeepSeek’s R1 model is far less expensive to create while maintaining high performance, thanks to its innovative use of resources like the mixture of experts technique. This approach activates only the necessary computing resources for a given task, making DeepSeek’s AI development much more cost-effective.

The tech industry, especially companies like Nvidia that rely on AI hardware, saw this as a huge disruption. Nvidia, a leader in the graphics processing unit (GPU) market, has seen explosive growth in its stock due to the AI boom. However, DeepSeek’s efficiency undermines Nvidia’s model, suggesting that less expensive alternatives could dominate AI development without requiring as much reliance on costly hardware.

The market responded negatively, leading to a massive sell-off in Nvidia's stock and a loss of $560 billion in value. Investors are now questioning whether the dominance of big players in the AI market is truly sustainable in the face of such cost-effective alternatives.

This loss represents the growing uncertainty in the tech sector as companies reassess their strategies and the competitive landscape for AI innovation.