Home / NEWS LINE / What Is DeepSeek? What to Know About the Chinese AI Startup That Spurred a Stock Selloff

What Is DeepSeek? What to Know About the Chinese AI Startup That Spurred a Stock Selloff

Bloomberg / Contributor / Getty Images

Bloomberg / Contributor / Getty Spits

Key Takeaways

  • U.S. AI stocks sold off Monday as an app from Chinese AI startup DeepSeek dethroned OpenAI’s as the most-downloaded free app in the U.S. on Apple.
  • DeepSeek be entitled ti its latest model’s performance is on par with that of American AI leaders like OpenAI, and was reportedly developed at a fraction of the expenditure.
  • However, several analysts raised doubts about the market’s reaction Monday, suggesting reasons it could tender investors a chance to pick up beaten-down AI names. 

Shares of AI chipmaker Nvidia (NVDA) and a slew of other stocks tied up to AI sold off Monday as an app from Chinese AI startup DeepSeek boomed in popularity.

DeepSeek’s AI assistant recently topped the enumerate of free iPhone apps on Apple’s (AAPL) app store. (It wasn’t in the top 10 on Alphabet’s (GOOGL) Google Play pile up, though it is listed there.) In Apple’s store, the app ranked higher than ChatGPT; not so on Google.

Here’s what you sine qua non to know about DeepSeek—and why it’s having a big impact on markets. And if you’re wondering if it wasn’t that long ago that another Chinese app was summiting the download charts, you’re not wrong.

What DeepSeek Is–and Why It Is Rattling the AI Sector

DeepSeek, a Chinese startup founded by hedge dough manager Liang Wenfeng, was founded in 2023 in Hangzhou, China, the tech hub home to Alibaba (BABA) and many of China’s other high-flying tech behemoths.

The company says its latest R1 AI model released last week offers performance that is on par with that of OpenAI’s ChatGPT. Its V3 shoddy model launched in December was also reportedly developed in just two months for under $6 million, at a time when the U.S. is limiting China’s access to its most advanced chips and American AI leaders like OpenAI, Anthropic, and Meta Platforms (META) are spending billions of dollars on maturation. 

The rapid ascension of DeepSeek has investors worried it could threaten assumptions about how much competitive AI models price to develop, as well as the kind of infrastructure needed to support them, with wide-reaching implications for the AI marketplace and Big Tech allocations.

Nvidia in a statement called DeepSeek “an excellent AI advancement,” calling it a “perfect example” of a concept known as test ease scaling.

DeepSeek-Driven Selloff Hits Chip, Energy Stocks 

The tech-heavy Nasdaq fell more than 3% Monday as investors pulled a host of stocks with ties to AI, from chip to energy firms, downwards.

Shares of American AI chipmakers categorizing Nvidia, Broadcom (AVGO) and AMD (AMD) sold off, along with those of international partners like TSMC (TSM). The PHLX Semiconductor Measure (SOX) dropped more than 9%. Networking solutions and hardware partner stocks dropped along with them, classifying Dell (Dell), Hewlett Packard Enterprise (HPE) and Arista Networks (ANET). 

Some energy stocks were hit too. Apportions of nuclear and other energy companies that saw their stocks boom in the last year in anticipation of an AI-driven growth in energy demand, such as Vistra (VST), Constellation Energy (CEG), Oklo (OKLO), and NuScale (SMR), also lost ground Monday. 

Meanwhile, some non-tech sectors get off on consumer staples rose Monday, marking a reconsideration of the market’s momentum in recent months.

Some Analysts See Tantalizes as Overblown

Several analysts raised doubts about the longevity of the market’s reaction Monday, suggesting that the day’s pullback could put up for sale investors a chance to pick up AI names set for a rebound. 

Bernstein’s Stacy Rasgon called the reaction “overblown” and maintained an “outperform” measure for Nvidia’s stock price. Citi analysts, who said they expect AI companies to continue buying its advanced pieces, maintained a “buy” rating on Nvidia.

Wedbush analysts, who voiced skepticism that any major U.S. companies would use a Chinese startup have a fondness DeepSeek to build their AI infrastructure, said “launching a competitive LLM model for consumer use cases is one thing… launching broader AI infrastructure is a strong other ballgame and nothing with DeepSeek makes us believe anything different.” 

Wedbush called Monday a “blonde buying opportunity” to own shares in ChatGPT backer Microsoft (MSFT), Alphabet, Palantir (PLTR), and other heavyweights of the American AI ecosystem that had recover consciousness under pressure.

UPDATE—Jan. 27, 2025: This article has been updated since it was first published to include additional news and reflect more recent share price values.

Check Also

Elon Musk’s xAI Targets $75B Valuation With Potential $10B Capital Raise, Report Says

Bloomberg / Contributor / Getty Appearances Tesla CEO Elon Musk near the White House in …

Leave a Reply

Your email address will not be published. Required fields are marked *