Chinese AI chatbot's rise slams US tech stocks

DeepSeek's AI assistant has quickly become the top free app on US iPhones

(Image credit: Greg Baker / AFP via Getty Images)

published 28 January 2025

What happened

The soaring popularity of a new AI chatbot from Chinese startup DeepSeek, plus the company's low-cost and high-performance advances in AI development, sent U.S. tech stocks tumbling Monday. Chipmaker Nvidia's shares slumped 17%, wiping out $600 billion in market value, the biggest one-day loss ever for a public company. The Nasdaq lost 3%, or roughly $1 trillion.

DeepSeek's AI assistant, released Jan. 10, became the top free app on U.S. iPhones Monday. Based on the company's V3 model, it is the first Chinese AI chatbot that impressed Silicon Valley, performing on par or better than OpenAI's ChatGPT. What roiled Wall Street was that "DeepSeek said it trained its AI model using about 2,000 of Nvidia's H800 chips," The Washington Post said, far fewer than the 16,000 more-advanced H100 chips typically used by the top AI companies.

Analysts noted that DeepSeek's founder amassed thousands of Nvidia's flagship H100 chips before the Biden administration blocked their export to China, and many were skeptical of the V3 model's purported $5.6 million development cost. But "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" or the giant data centers companies have been promising, The Wall Street Journal said. The "big moment for DeepSeek" arrived last week when it released its R1 model, which "dazzled" experts with an "ability to reason tough problems in ways that rivaled — and some say, surpassed — OpenAI's capabilities," for a fraction of the cost. "DeepSeek R1 is AI's Sputnik moment," venture capitalist Marc Andreessen said on X.

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Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.