Markets in free fall yesterday... stocks, crypto, everything bled! And the reason? A small but mighty name from China: DeepSeek.
What’s that now? . Let me explain. It’s a new AI startup that just announced a groundbreaking new model, the R1, and it’s causing an uproar. In fact, tech stocks like Nvidia , Oracle , and Broadcom took a massive hit, with losses reaching up to -17%! Why? Because DeepSeek seems to be proving that you don’t need the massive budgets of American giants to create something impressive.
Why is it causing such a stir? And most importantly, what does this mean for us investors?
DEESEEK
DeepSeek is a startup from China founded in 2023 by a guy named Liang Wenfeng. In just one year, this company has become a global headline.
Alright, but what’s so special about it? The answer is its R1 model. It’s an AI model that:
(a) is open-source, meaning developers worldwide can improve it;
(b) is low-cost, as the Chinese managed to develop it with a much smaller budget than what OpenAI and Meta spend; and
(c) smashes the benchmarks.
The R1 is leading in major tests like AIME 2024 and MMLU (and yes, these sound like gibberish too), while also excelling in general knowledge and logical reasoning.
To give you an idea of the chaos it’s caused, the chatbot based on the R1 became the #1 downloaded app on iPhones in multiple countries, including the U.S., Canada, and Australia. By January 25th, it had been downloaded over 1.6 million times!
THE COMPETITION
Okay, but why all the fuss?The answer is simple: DeepSeek proves you can achieve wonders without the most advanced resources.
Think about it. The U.S. imposed restrictions on China regarding the purchase of top AI chips like Nvidia H100s. This was supposed to be a massive hurdle for Chinese companies. Yet DeepSeek has shown that with smart design and efficient use of available resources, you can achieve something extraordinary.
Naturally, this has created panic in the markets, as investors fear that American tech giants may lose their edge.
So that’s it? Should we panic? Of course not! Stay calm, folks. The U.S. has repeatedly shown in the past that it knows how to handle situations like this. Just last week, the Stargate Project was announced, a massive $500 billion initiative aimed at investing in the next generation of AI infrastructure.
It’s clear that American companies, along with the government, won’t sit idly by. The tech industry is a marathon, not a sprint, and Silicon Valley knows exactly how to run such long races.
My question is this: Is China starting to win the race in big tech like it did with the cars? Or the US will be able to stay ahead??????