DeepSeek, a Chinese AI startup, has suddenly emerged as a threat to the dominance the US tech and AI industry enjoyed over the last few years. Global investors and analysts predict DeepSeek could have a significant impact on the fortunes of US tech stocks and thereby, the global markets.
In particular, DeepSeek challenges major American companies like Nvidia, OpenAI, Google, and Meta, all of which have dominated the AI space for years.
The ‘black swan event’ is an unpredictable and significant global event that, in hindsight, appears almost inevitable. Some analysts predict DeepSeek’s rapid rise as a potential black swan event for the worldwide stock market, causing significant disruption to US tech stocks.
Last week, DeepSeek introduced a new generation of AI models that directly compete with the ones developed by established US companies. What distinguishes DeepSeek is its emphasis on developing more efficient and cost-effective AI models, particularly hardware.
DeepSeek’s models reportedly cost 30 times less to run on older hardware compared to traditional US-based AI systems. DeepSeek’s lower-cost models could be a huge advantage, especially for companies and researchers looking for cheaper alternatives to high-cost AI systems.
DeepSeek’s approach is making waves because it is about more than simply efficiency; it is also about making AI open-source, which means that others can use and improve their work for free. DeepSeek’s open-source methodology distinguishes it from competitors such as OpenAI and other US businesses that normally charge for access to their AI technologies.
DeepSeek has raised the bar for organizations that rely on premium AI services by making their AI available to a wider group of users.
The concern is that if DeepSeek continues to develop its models and acquire popularity, it will cause a big disruption in the business. US-based companies, particularly those like Nvidia, which manufactures the technology used to fuel AI models, may face significant problems.
Nvidia’s stock, for example, has skyrocketed as artificial intelligence has emerged as a key driver of growth in the technology industry. However, if DeepSeek’s cheaper AI models gain traction, demand for Nvidia’s pricey hardware may plummet, lowering its stock price and market value.
DeepSeek has also teamed with AMD, a competitor to Nvidia, to boost its position in the AI sector. AMD’s expertise in high-performance processing might help DeepSeek create even more powerful and efficient AI models, putting them on par with US-based enterprises. This collaboration may enable DeepSeek to scale its technologies more quickly, raising questions about how quickly the US IT titans may have to respond.
Chinese tech companies like ByteDance and DeepSeek are gaining ground in AI, intensifying competition for US companies. This trend is part of a larger trend of Chinese companies challenging US dominance in the tech sector, raising concerns about the future threat to the US’s AI market.
For now, DeepSeek’s innovative AI techniques and open-source commitment are gaining attention from industry leaders, potentially disrupting the global AI market balance and prompting US companies to rethink their strategies.
The US tech market is experiencing nervousness, with US tech stocks, particularly in AI, experiencing volatility. The Nasdaq Composite futures are down over 2% on Monday due to growing concerns over DeepSeek’s impact on AI technology, which could potentially reduce the value of leading US AI stocks.
DeepSeek’s potential impact could potentially lead to significant losses for Nvidia stock and other Nasdaq-listed stocks if the threat is perceived as real. The Nasdaq 100 is trading at 27 estimated forward earnings, compared with its three-year average of 24 times while Nvidia is at 33 times.
DeepSeek’s rise in the US tech industry is causing concern for investors and industry leaders as AI competition intensifies and its impact on US tech stocks is expected to be significant.
