DeepSeek AI’s Arrival Causing A Crash On AI Hardware Market
The arrival of modern AI-based services like ChatGPT caused an earthquake in the tech industry. Now, something similar is happening in the AI niche with the arrival of DeepSeek. The Chinese startup’s chatbot recently became the most downloaded app on Apple’s App Store in the US. Plus, DeepSeek’s powerful capabilities and low cost are causing a disruption in the market that has rarely been seen before.
DeepSeek’s disruption in the market could reduce AI development prices considerably
Developing AI-powered services often results in products with incredible features. However, companies have to overcome some key hurdles before entering the field. The main drawback is the high cost of developing and training AI models. Whether they buy AI chips from suppliers like NVIDIA or rent AI hardware in the cloud from Google, developing artificial intelligence is not cheap.
Naturally, a solution that helps reduce costs to a fraction would cause a powerful disruption in the AI market, and that is what DeepSeek seems to be doing. The China-based startup launched an AI-powered chatbot on Apple’s App Store almost two weeks ago. The rival service to ChatGPT and others is powered by the DeepSeek-V3. Being a Chinese AI model, many of you probably have concerns regarding the privacy of your data. However, the DeepSeek-V3 model is open source, so anyone can audit it. If China were spying on you or stealing your data through the platform, you would already know about it.
DeepSeek’s real impact on the market stems from its features-to-cost ratio. According to its developers, DeepSeek outperforms ChatGPT and several other AI models on multiple parameters. But not only that, training it costs just a fraction of the price of other top AI models. The DeepSeek team claims that they only invested about $6 million in training. The firm achieved this by relying on thousands of old NVIDIA H800 chips.
Product of collaborative approach of AI Chinese industry
The current focus of the Chinese AI industry has also helped reduce the cost of DeepSeek tremendously. US trade restrictions prevent Chinese firms from accessing the latest AI hardware available. To mitigate this, China has adopted a collaborative, open-source approach to its AI developments. In this way, major AI companies share their developments and technology with each other, each experimenting with new approaches, contributing new ideas, and leading to faster advances.
The low cost of the model is reflected in the price to users. DeepSeek offers several features for free that require a monthly fee on rivals like OpenAI’s ChatGPT.
Big AI hardware vendors shares crashing
The arrival of DeepSeek caused a resounding crash in the stocks of big AI-related companies. The effect is being felt mainly in AI hardware providers, with NVIDIA plummeting more than 17% on the stock market in the last 24 hours. Shares of NVIDIA rival Broadcom also fell by about 18%. Software product developers also took a hit, although much smaller. Microsoft and Google fell as much as 3.7% and more than 3% on the stock market today, respectively.
It’s clear why AI hardware vendors were hit hardest by DeepSeek’s disruption to the market. Investors are now questioning whether their previous bets on companies that spent much more on AI chips than the DeepSeek team will pay off. At the same time, AI-focused companies are likely evaluating whether they can implement similar cost reductions on AI hardware or use older chips.
Either way, it looks like DeepSeek will change the AI industry in a big way. Vey-Sern Ling, a Singapore-based technology equity adviser, said the new development could “potentially derail the investment case for the entire AI supply chain.”
