Donald Trump has called China's new AI model, DeepSeek, a "wake-up call" for the U.S. tech industry, following a significant drop in Nvidia's market value—nearly $600 billion. DeepSeek's emergence triggered a sharp decline in AI-related stocks. Nvidia, a major GPU provider for AI, suffered the most, experiencing a 16.86% share plunge—a record loss on Wall Street. Microsoft, Meta Platforms, Alphabet, and Dell Technologies also saw declines ranging from 2.1% to 8.7%.
DeepSeek's R1 model is marketed as a significantly cheaper alternative to Western AI models like ChatGPT. Built on the open-source DeepSeek-V3, it reportedly requires less computing power and was trained for an estimated $6 million. While this claim is disputed by some, it has raised concerns about the massive investments American tech companies are making in AI, unsettling investors. DeepSeek's popularity surged, reaching the top of the U.S. free app download charts amidst growing discussions about its performance.
"[DeepSeek] performs as well as leading Silicon Valley models and, according to their claims, even better in some cases," Sheldon Fernandez, co-founder of DarwinAI, told CBC News. "But they achieved this with a fraction of the resources, which is turning heads in our industry. Instead of paying OpenAI $20 or $200 a month for advanced models, people can get similar features for free. This disrupts the business models many companies relied on to justify their high valuations."
President Trump offered a more optimistic perspective, suggesting DeepSeek could be beneficial for the U.S. "Instead of spending billions and billions, you'll spend less and hopefully achieve the same solution," he said, as reported by the BBC. "If you can do it cheaper and get the same result, that's a good thing for us," Trump added, while maintaining his belief in continued U.S. AI dominance.
Despite DeepSeek's impact, Nvidia remains a $2.90 trillion company. The company is set to release its highly anticipated RTX 5090 and RTX 5080 GPUs later this week, generating significant consumer demand—with some braving cold weather to camp outside stores to secure purchases.
