DeepSeek and Stock Market Analysis: What You Need to Know

The tech world is no less than a rollercoaster ride. The buzzing generative AI industry is shocking the tech giants every single day. But now with the launch of the new Chinese AI model DeepSeek, the U.S GenAI market is on the verge of a wakeup call. As U.S President Donald Trump said;

“Chinese new generative AI model DeepSeek should be a wakeup call for U.S tech monarchs. He further added; we should be laser-focused in terms of competition"

In the last few years, we have known that all the hype is about AI. The most advanced chip maker company –NVidia whose chips are used for all the AI developments, went from $5 per share to $150 per share from early 2020 to late 2024. From the figures, we can analyze the sky-rocket upsurge of NVidia Company worldwide. But on January 27th, something surprising happened and NVidia immediately lost 17% of its market value. The surprise widespread loss in the company came from the launch of none other than Chinese DeepSeek.

So to know all the possible impacts of DeepSeek on the stock market, stick around and explore the interesting facts.

Statistical Analysis of Stock Market Sell-off Due to DeepSeek Launch

The launch of China's new R1 (reasoning Model), which is reportedly free to use and cheap to train has triggered a massive stock market sell-off. The biggest loser in between all this fuss was NVidia. For those who do not know, it's one of the biggest U.S. chipmaker Companies. It nearly shed $600bn in market capitalization. Due to the NVidia market value loss, the heavy tech stock exchange “NASDAQ” index also dropped more than 3% right after the launch.

Not only NVidia but other two important Chipmaker companies Taiwan Semiconductor Manufacturing Company and Broadcom also witnessed their share value slip i.e. 13% and 17% respectively.

Since market has now rebounded, but the loss figures represents a massive single day loss in the U.S stock market history. This loss will not only effect the tech but it also raises some geopolitical implications between the competitor china and U.S AI dominated market.

Training Cost of DeepSeek: Chinese Open Source GenAI substitute

Reports tells that,$5.6m was the total entire cost of training DeepSeek’s model, which is reportedly far less than the training costs of Silicon Valley LLMs. Owing to these numbers investors began to fear about the undermining of big firms like OpenAI and Google for their reliance on power-guzzling process for AI systems training due to Chinese upstart.

If we talk about the use of NVidia Chips for training the DeepSeek model then before the launch of R1 model( Advanced reasoning model), in December 2024, it releases its V3 model. It’s a language model and according to company it is trained on just 2,048 NVidia Chips.

Moreover, the training of data is not yet disclosed publicly however its “code base” and “weights” (these are the numerical parameters which helps in showing the connections between the nodes in a model) are open sourced.

So, it means that anyone with some sort of technical know-how and hardware can easily audit or host slight of DeepSeek. Remember it’s not possible with OpenAI models.

DeepSeek: How it Impacts the Game of Global AI Stock Markets

As discussed above Initially DeepSeek released its R1 model. It’s a large language model (LLM) developed by China. The model right after its launch; turns out to be so good that it challenges OpenAI’s ChatGPT 01 model.

Not only did this, but DeepSeek managed to achieve its ultra-performance at a fraction of the cost without even using advanced NVidia Chips. (Remember that the U.S. restricts the export of NVidia advanced GPU Chips to China). Due to all these particular reasons, the actual market loss was triggered.

Now let's delve into the biggest global market crash;

NVidia’s Historical Loss

Due to the development of Chinese AI start up; “Deepseeek”nearly under $600million, NVidia’s market cap value goes down for the first time with losing $593B. This loss declares as one of the biggest one day crash in the U.S history, triggering NVidia stocks to drop nearly 17%.

So, the statement of investors about NVidia forever dominancy in Chip market went wrong here. Along with the DeepSeek launch, the NASDAQ index as discussed earlier also seems to fell by 3.1%. Additionally, other biggest names in tech like Microsoft, Broadcom and Alphabet also experience the significant decline. All the losses results in shocking $1 trillion market value wipe-out across the U.S exchanges.

Moreover, the successive breakthrough of DeepSeek has ignited a comprehensive analysis of the AI industry, which in returns leads to the reassessment of the technology future and the attached economic consequences. So, from there the actual market crash triggered.

Fallen Japanese Tech Stock due to DeepSeek

Between global AI stock market sell off due to DeepSeek chatbot, Japanese tech stock also tumbled, thus extending the losses amidst global market loss. The Tokyo stock market of Japan, which is followed by the rout of Wall Street has erased over $500 billion due to NVidia loss. These losses clearly explains the capabilities of DeepSeek’s R1 chatbot, thus, trembling the confidence of U.S leaders in heavy AI expenses.

Moreover, the biggest Japanese tech firms also experience the significant fall. For example tech firm Advantest fall to 11%, Softbank which is known as one of the major investor in U.S AI projects plunged to 5% and lastly, Tokyo Electron dropped 4.4% stock value.

Concerns Over the fall of US Tech Stocks

The recent biggest unrest in U.S tech stocks highlights the reliance of U.S stock markets on some of the biggest companies for their record setting success. The megacaps, primarily known as “Magnificent Seven” account for the third of the S&P 500’s weight have powered over half of its 2024 revenues. Due to this, analysists warns about the risks towards such concentrations. Because these sell offs largely effects the market benchmarks.

Moreover, the potential of DeepSeek to lessen the cost of AI infrastructure can also be a threat in the undermining of big tech dominance. However, some analysts are of the view that it’s all just a bare overreaction. At the same time other sees it as a potential market articulation point. Now the marketer’s attention has been shifted to the upcoming earnings from big tech firms like Apple, Microsoft, Tesla, and Meta to further shape the opinions.

Percentage of Stock’s share Decline due to DeepSeek’s Rise

Tech Giant Reactions Amidst U.S-China AI Race

Tech giant’s reactions in terms of DeepSeek's rise ranged from confidence to confusion. For instance one of NVidia's spokes person while describing the DeepSeek chatbot said;

“It’s an excellent advancement in AI. As DeepSeek is trained on older NVidia Chips. So U.S chip giants might welcome the emerging company into the AI race”
However, some of the tech giants like “Dario Amodei” who is the “CEO of Anthropic” said in one of his speeches that;

“The market panics are totally “baffling” and the anger that is coming out is significantly overstated”
Amodei also shows concerns about the efficiency of DeepSeek. This happens because some analysts claim that DeepSeek start-up has access to more than 50,000 NVidia Hopper GPUs. If it’s true then such collection would charge close to $1bn which are far more than the billions that were told for the period of sell off.

So, if Amodei’s estimate is correct then it will put DeepSeek’s total expenses fairly adjacent to the U.S AI labs. Another concern Amodei highlighted despite the training cost of the Chinese model are some of the geopolitical repercussions which are as follows;

The timing of DeepSeek's launch is confusing for the investors. Why so, because it follows the announcement of Stargate, which is a joint $500bn infrastructure project between OpenAI, U.S and Oracle. So, the very mission is professed by the investors as the acceleration between China, U.S AI race.

According to Lennart Heim, a renowned tech analyst at Rand “the DeepSeek launch amidst this venture might be strategic but the technology seems real. He further added that, the chatbot launch during U.S president Donald Trump’s appointment might be envisioned to crash the confidence of public upon U.S AI leadership”.

So, there are a lot of confusing points about the DeepSeek’s launch and its impact on Global stock markets but the technologists surely agree that DeepSeek is surely a troublesome entry into the AI race.

Post DeepSeek: Who Will Win?

The DeepSeek AI shock truly accentuates the importance of the selection of stock. Owing to these concerns, Chief Investment Officer, Sanjay Rijhsinghani in one of his statements said that;

“Rather than reacting, investors should consider this movement as a token to build enough resilience". He further added that markets will shift and diversification would be the only best way to navigate what's next."

Moreover, stock market shocks are common when it comes to technological breakthroughs.Will Hobbs head of multi-asset at Barclays UK Wealth Management said that;

“Entrepreneurs should quickly understand the breakthroughs and find best ways to make them cheaper and useful amidst the race to commercialize.”

“He further added that sharing of information and global competition is very useful in the process. NVidia along with the hyperscalers are the early front-runners but they may not be the ultimate winners in the new paradigm shift”

DeepSeek VS Tech Giants: Final Thoughts

As we know generally copying is easy buy to achieve extraordinary results and innovation is a much bigger breakthrough. In this case, what OpenAI dominance has done in recent years hasn't been questioned, but if any kind of replication is easy then it's a reconsideration moment for the investors. They should think twice before channeling a hefty amount of money into AI infrastructure. Another major feature of AI economics under inspection is the amount of data required to train the AI models. There is a common belief that ‘more data better results’ but DeepSeek has shattered this belief while delivering strong performance with less data. This concern also remains unresolved thus raising queries and niche problems.

So, to conclude the debate, we can say that stock markets are undergoing through reconsideration phase. They are trying to figure out which economic principle would be applied and how AI markets will function. However, these questions might be a painful realization for big AI investors. Nonetheless for average users, this competition probably tends to be a great thing to make products cheaper. Let's see where the AI stock market's future energies because, in the end, stocks will recover who deserves to recover.