Nvidia, the US chip giant that has been at the forefront of the AI revolution, experienced an unprecedented market value loss on Monday, shedding nearly $600 billion (£480 billion) as its shares plummeted 17% by market close.
This marks the “single greatest one-day value wipe-out” of any company in Wall Street history, sending shockwaves through the global tech industry.
The dramatic decline in Nvidia’s stock price has been largely attributed to the recent launch of DeepSeek-R1, an open-source AI model developed by Chinese startup DeepSeek. The launch and surging popularity of DeepSeek-R1 has spooked investors, which in turn has lead to a sell-off of Nvidia stock.
This new AI model has cast doubt on the supremacy of US tech firms and their reliance on expensive, high-end chips for AI development.
DeepSeek’s developers claim they created their AI model using less sophisticated and fewer computer chips compared to those utilised by leading US tech firms. They reported investing under $6 million in computing resources to train their model, a fraction of the multi-billion dollar AI expenditures typically seen among US giants such as OpenAI, Alphabet, and Meta. As well as this, it also has no requirement for an expensive subscription like some OpenAI models.
Marc Andreessen, a prominent Silicon Valley venture capitalist, characterised the launch of DeepSeek-R1 as “AI’s Sputnik moment,” signifying a pivotal point in the industry.
The rapid rise of this small Chinese company, capable of challenging top entities in Silicon Valley, has prompted a reevaluation of the US’s supremacy in AI and raised concerns about the soaring market valuations of companies like Nvidia. Tim Miller, an AI professor at the University of Queensland, commented on the significance of DeepSeek’s achievement: “If DeepSeek’s cost estimates are accurate, then virtually any large organisation can now build and host it. In this regard, the landscape has changed dramatically as there is a new ‘rule’ allowing anyone to participate.”
The impact of DeepSeek’s innovation extends beyond Nvidia. Other major tech companies also experienced declines in their stock prices, with Alphabet and Microsoft seeing drops of 4.5% and 2.5%, respectively.
While this development has caused concern in the US tech industry, it’s worth noting that the field of AI is rapidly evolving.
OpenAI CEO Sam Altman acknowledged DeepSeek-R1 as “impressive” but defended his company’s emphasis on increased computing power, and stated: “We will undoubtedly produce superior models, and it’s genuinely invigorating to have a competitor!”
As the global AI race intensifies, the implications of DeepSeek’s breakthrough could potentially impact the Scottish tech industry, which has been making strides in AI development. This shift in the AI landscape may present both challenges and opportunities for Scottish businesses looking to compete in the global market.
