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The sudden emergence of the Chinese artificial intelligence (AI) DeepSeek has spelled a crisis for American tech innovation as it released a generative AI model that can perform on par with United States-made OpenAI's "cutting edge" counterpart.
Knewz.com has learned that DeepSeek R1 overtook America’s top chatbot to become the most downloaded free application on the Apple Store in the U.S.
While the innovation shown by OpenAI and other companies at the heart of the AI "craze" has led to investors feeding trillions of dollars into the industry, the Chinese AI model was reportedly built on an investment of less than $6 million.
As a result, investor confidence in the industry turned to concern over the cost-effective innovation made possible by DeepSeek, leading to a massive sell-off in tech stocks.
One of the companies that was hit the hardest by the plummeting investor confidence is Nvidia—the chip manufacturing firm at the heart of the AI boom.
So far, Wall Street believed that the company had "an almost unbreachable defense against competition with its offerings of high-tech chips."
According to reports, "The company’s rapid growth and windfall profit have helped push other technology firms and the Nasdaq Composite Index to record after record, with giddy investors expecting more of the same down the road."
It has been reported that the sale of Nvidia chips skyrocketed during the AI boom around two years ago and emerged as one of the most profitable companies of all time.
The company saw $63 billion in earnings in its last four quarters, and its shares have increased eightfold since the end of 2022.
However, with DeepSeek's generative AI model having entered the scene, investors are not sure future AI models would require high-tech (which often translates to "expensive") chips from companies like Nvidia.
"Creative engineering tricks meant DeepSeek needed far less computing power. The upshot is that the AI models of the future might not require as many high-end Nvidia chips as investors have been counting on," reports have explained.
On Monday, January 27, Nvidia's stocks dropped by 17% to their lowest level since October 2024, erasing $600 billion of its market value.
It has been reported that Nvidia's market plunge marked the largest one-day loss in market value for a public company.
Furthermore, tech stocks Broadcom and Micron Technology fell more than 10% and the S&P 500’s tech sector lost 5.6%, marking its "worst one-day decline" in over four years.
"In all, Monday’s bloodbath wiped out some $1 trillion from the stock market’s value, according to Dow Jones Market Data," it was reported.
Chamath Palihapitiya, a major Silicon Valley investor, Trump donor, and co-host of the popular All-InPodcast, said in a recent statement, "A Chinese AI company releasing such a capable open-source model should be a wake-up call for America."
It is worth noting that the latest development came a week after President Donald Trump invested in new infrastructure to support the AI industry and supported a $500 billion venture led by OpenAI, SoftBank, and Oracle to build data centers and energy projects.
According to the new President, the said venture would generate up to "100,000 jobs."
Given the tech stock market crash on Monday, Ed Yardeni, president and chief investment strategist at Yardeni Research, commented: "We’re coming back down to planet Earth... Technology is probably one of the most, if not the most, competitive industries."