CHINESE artificial intelligence company DeepSeek entered ‘holiday mode’ for Lunar New Year yesterday, having crashed the US stock market the day before.
The most notable victim was US chip giant Nvidia, whose shares fell 17%, cutting its stock market value by about $593bn (£433bn) – the biggest single-day loss in US market history.
That’s the equivalent of losing about the entire market valuation of oil giant Exxon, or credit card giant MasterCard.
However, Nvidia is still worth more than $2.9 trillion. In fact, only Apple and Microsoft are currently ranked ahead of Nvidia in terms of market valuation.
DeepSeek was founded in December 2023 by Liang Wenfeng and released its first AI large language model last year.
He is the CEO of a hedge fund called High-Flyer, which uses AI to analyse financial data to make investment decisions – what is called quantitative trading.
Asked why DeepSeek’s model surprised so many in Silicon Valley, he said: ‘Their surprise stems from seeing a Chinese company join their game as an innovator, not just a follower – which is what most Chinese firms are accustomed to.’
Other tech stocks also fell, with Microsoft down 2%, Google-owner Alphabet lost 4% and Dell Technologies, which makes AI servers, down 8.7%.
It wasn’t only tech stocks that were affected. Power companies – which had previously been expected to benefit from the demand for power to drive AI data centres – saw big losses, with Vistra Corp plunging 28%.
The falls had a knock-on effect in Asian markets yesterday. Shares in Japanese AI-related firms – including Advantest, Softbank and Tokyo Electron – all fell sharply.
What makes DeepSeek so special is that its R1 model was made at a fraction of the cost of its rivals – threatening the future of America’s dominance in the AI industry.