On Monday, Nvidia’s stock price fell by 17 percent. The firm, whose chips have powered America’s AI revolution, lost nearly $600 billion in market capitalization—the largest single-day sell-off in history. Other tech stocks plummeted too, with more than $1 trillion wiped off U.S. stock markets.
Why? Because DeepSeek, a small Chinese start-up almost no one had heard of until last week, announced that it had built high-performing AI models at a fraction of what America’s tech giants spend on theirs. The firm claims that it took just $6 million and two months to build its reasoning model, DeepSeek-R1. It works at least as well as its American rivals’ models, which required billions of dollars’ worth of state-of-the-art chips, and DeepSeek’s software has jumped to the top of the app store sales charts, leapfrogging OpenAI’s ChatGPT.
By delivering high-performance capabilities without demanding the staggering computational resources of Western AI models, DeepSeek brings cutting-edge AI within reach of anyone with modest resources. In doing so, it has blown up our assumptions about American supremacy in the AI race—and could herald a period of dangerous instability.
While DeepSeek’s low-cost breakthrough has upended the AI world, the disruption is more profound than that.