US Tech Giants Challenged by China's AI Advance

Donald Trump has called China's new AI model, DeepSeek, a "wake-up call" for the U.S. tech sector following a significant drop in Nvidia's market valuation. The emergence of DeepSeek triggered a sharp decline in AI-related stocks. Nvidia, a major player in GPUs crucial for AI, suffered the most, experiencing a record-breaking 16.86% share price plunge. Microsoft, Meta, Alphabet, and Dell Technologies also saw substantial losses.

DeepSeek's R1 model is marketed as a significantly more affordable alternative to Western AI offerings like ChatGPT. Leveraging the open-source DeepSeek-V3, it reportedly requires less computing power and had an estimated training cost of just $6 million. Although this claim is disputed by some, it has raised concerns about the massive investments made by American tech companies in AI, unsettling investors. DeepSeek's popularity surged, topping U.S. app download charts, fueled by discussions regarding its performance.

Sheldon Fernandez of DarwinAI commented to CBC News, stating that DeepSeek's performance rivals leading Silicon Valley models, and in some cases, surpasses them, all while using significantly fewer resources. He highlighted the potential disruption to existing business models, as DeepSeek offers comparable features for free, challenging the high valuations of established companies.

Trump, however, offered a more optimistic perspective, suggesting DeepSeek could be beneficial for the U.S. by potentially reducing AI development costs while achieving similar results. He emphasized the U.S.'s continued dominance in the AI field.

Despite DeepSeek's impact, Nvidia remains a substantial company, valued at $2.90 trillion. The company is preparing to launch its highly anticipated RTX 5090 and RTX 5080 GPUs, generating significant consumer demand.