DeepSeek AI Launch Triggers US Tech Stock Recovery
US Tech Stocks React to DeepSeek Launch
On January 28, 2025, U.S. tech stocks saw a tentative recovery following comments made by former President Donald Trump regarding China’s DeepSeek AI chatbot. Trump characterized the launch of the DeepSeek chatbot as a pivotal “wake-up call” for Silicon Valley amidst the intensifying global competition in artificial intelligence.
Market Dynamics and Reactions
The emergence of DeepSeek has drastically affected the market, resulting in a staggering $1 trillion drop in the value of leading U.S. tech indices the previous day. Nvidia, known for its prominence in the AI hardware market, suffered an unprecedented loss, with $600 billion erased from its market value, marking the largest one-day decline in U.S. stock market history.
Global Market Impact
This decline extended to Asian markets, with Japan’s Nikkei index dropping by 1.3% as tech stocks faltered. Notably, Advantest and Tokyo Electron saw declines of 11% and nearly 6%, respectively. Other significant Asian markets remained closed due to the lunar new year holidays.
Recovery Signs in US Markets
Despite the initial turmoil, early trading in the U.S. showed a glimmer of recovery. The Nasdaq Composite opened stronger, dipping before regaining positive footing and finishing with a 2% gain by midday. Nvidia managed a slight rebound, increasing by 9% after a dramatic drop, while Alphabet and Microsoft saw gains of 1.7% and 2.9%, respectively.
Trump’s Commentary on Competition
Trump’s commentary highlighted DeepSeek’s ability to match the performance levels of established AI models like ChatGPT and Google’s Gemini with significantly fewer resources, raising concerns about the U.S.’s leading position in the AI sphere. “That’s good because you don’t have to spend as much money,” he argued, framing this development as a favorable shift rather than a threat.
DeepSeek’s Rapid Rise in Popularity
After its recent launch, DeepSeek’s assistant overtook ChatGPT in downloads from the Apple App Store, marking a significant milestone for the new AI technology. Sam Altman, CEO of OpenAI, acknowledged DeepSeek’s achievements while expressing confidence that the U.S. AI industry would enhance its development efforts in response to newfound competition.
Pivotal Moments in AI Competition
Marc Andreessen, a notable venture capitalist, contrasted DeepSeek’s launch with the historical context of the U.S.-Soviet space race, dubbing it AI’s “Sputnik moment,” referring to the shock of the Soviet Union’s early space achievements. DeepSeek asserts that its R1 model performs significantly better than various established models across multiple benchmarks.
Founding and Focus of DeepSeek
Founded by Liang Wenfeng, who previously leveraged AI to analyze stock patterns for his hedge fund, DeepSeek focuses primarily on research rather than commercial applications. The underlying code and the DeepSeek assistant can be downloaded for free, presenting a cost-effective alternative to competitors like OpenAI’s models, enhancing its accessibility and appeal in an increasingly competitive market.