On January 27, 2025, the global financial markets were rocked by the surge in popularity of DeepSeek, a Chinese artificial intelligence model. The impact was immediate and severe, with significant drops in major stock indexes and cryptocurrencies. Futures on the Nasdaq 100 fell by 2.6%, and the S&P 500 declined by 1.4%. Tech stocks, especially those of Nvidia and its supplier Advantest, saw drops as much as 8.5%. This article explores the factors behind these changes and how they are reshaping the crypto market list.
The rise of DeepSeek: what sparked the collapse?
DeepSeek, a Chinese AI company, released its DeepSeek-V3 model on January 10. The model was developed using Nvidia’s H800 chips, which cost the company under $6 million. These chips were not cutting-edge but were originally designed to bypass export restrictions to China. However, they eventually became subject to U.S. sanctions.
Despite the relatively low cost of DeepSeek’s model, the implications are significant. Analysts are questioning the viability of major tech investments, particularly in companies like Nvidia, suggesting that the idea of U.S. tech dominance is beginning to waver.
Cost Comparison: DeepSeek vs. Western AI Solutions
To understand the scale of the disruption, let's compare the costs:
- Training cost: $100 million (U.S. AI models) vs. $5 million (DeepSeek)
- GPU requirements: 100,000 (U.S. models) vs. 2,000 (DeepSeek)
- API pricing: DeepSeek’s costs are 95% lower
- Hardware requirements: DeepSeek can run on gaming GPUs instead of expensive server-grade equipment
These differences highlight the ability of DeepSeek to drastically reduce the costs of AI development, which in turn poses a direct threat to Western AI leaders like Nvidia.
Who is affected by DeepSeek's rise?
As DeepSeek continues to gain traction, stocks of major tech companies have taken a hit. For instance, shares of ASML, a key player in semiconductor manufacturing, dropped by 9.5%. This has raised concerns about the shifting balance of technological power, with many experts warning that the West’s technological supremacy is being challenged. Despite sanctions, China continues to advance in high-tech innovations, and this shift is visibly impacting market sentiment.
In simple terms, the popularity of expensive technologies like Nvidia’s chips is waning, while affordable alternatives like DeepSeek’s AI are driving down costs and making AI more accessible.
The Crypto Crash: A ripple effect
The repercussions of the tech stock crash also hit the cryptocurrency market hard. Bitcoin, for instance, dropped below $99,000, taking down altcoins by 10-20%. This has resulted in about $1 billion in liquidations, according to market experts. The crash is partly attributed to a general market fatigue, compounded by panic selling.
What’s next?
The U.S. market is currently in a quiet period, but experts predict that further declines could be imminent in the coming hours. The rise of DeepSeek, with its more affordable AI solutions, is signaling a new era in global tech dominance, and its ripple effect is likely to continue across multiple industries. For more information on AI Coins, visit AI Coins.
