Photo: Reuters
The race for dominance in artificial intelligence was thrown wide open on Monday as the launch of a Chinese chatbot wiped $1 trillion off the major US tech index, with one investor calling it a "Sputnik moment" for the world's AI superpowers.
Investors hammered global technology markets on Monday when DeepSeek, a competitor to OpenAI and its ChatGPT tool, appeared to provide the same performance with fewer resources, casting doubt on the US artificial intelligence boom.
The tech-heavy Nasdaq Composite fell 3.1%, knocking off more than $1 trillion from the index's closing value of $32.5 trillion last week as investors weighed the ramifications of DeepSeek's latest AI model.
Nvidia, a key supplier of computer chips that fuel AI models, was surpassed by Apple as the most valuable listed corporation in the United States after its shares plunged 17%, wiping about $600 billion off its market worth.
Microsoft lost $7 billion, while Google's parent firm lost $100 billion. Nvidia's decline was the largest in US stock market history. The DeepSeek AI assistant also topped the Apple app store in the United States and United Kingdom over the weekend, surpassing OpenAI's ChatGPT.
DeepSeek, according to US President Donald Trump, should be a “wake-up call for our industries that we need to be laser-focused on competing to win”, the Guardian reported.
He said he had been “reading about China” and its companies, in particular one that had come up with a “faster method of AI and [a] much less expensive method”.
“That’s good because you don’t have to spend as much money. I view that as a positive, as an asset,” Trump said.
Praising DeepSeek’s launch, OpenAI chief executive Sam Altman said that it was “invigorating to have a new competitor”.
In a social media post, Altman called it “an impressive model, particularly around what they’re able to deliver for the price”.
Japanese IT firms in the AI sector fell for the second day in a row on Tuesday, as investors followed the collapse on Wall Street.
Advantest dropped more than 9%, while tech investor SoftBank, a significant investor in Trump's Stargate AI project, fell more than 5% after losing 8% the day before. Most other Asian markets climbed in limited activity ahead of the Lunar New Year holiday.
DeepSeek was attacked by a cyber-attack on Monday, prompting it to temporarily restrict registrations. DeepSeek stated on its status page that it began investigating the issue late Monday night, Beijing time.
After nearly two hours of monitoring, the company said that it had been the victim of a "large-scale malicious attack". DeekSeek limited registrations, however existing users were able to log in as usual.
DeepSeek claims to have used fewer chips than competitors to make its models, making them cheaper to produce and raising concerns about a multibillion-dollar AI spending spree by US corporations that has bolstered markets in recent years.
According to a research paper published in December, the company devised bespoke algorithms to build its models using Nvidia's reduced-capability H800 chips. US sanctions have barred Nvidia's most advanced processors, H100s, from being exported to China after September 2022.
Nvidia also created the less powerful H800 chips for the Chinese market, but those were also barred from export to China in October.
DeepSeek's achievement in developing an advanced AI model without access to cutting-edge US technology has raised questions about the effectiveness of Washington's efforts to stifle China's hi-tech sector.
Marc Andreessen, a prominent US venture capitalist, compared the launch of DeepSeek's R1 model last Monday to a historic event in the US-USSR space race, posting on X that it was AI's "Sputnik moment" - a reference to the Soviet Union's surprise launch of a satellite into orbit.