With the recent buzz around China's Deepseek AI model and the fact that it is significantly more cost-efficient than OpenAI, does anyone think it will impact companies like NVDA or AMD? It is open-source, so anyone can replicate it.

For context, they did use NVDA chips to make this but it cost them $6MM to produce while we are now investing $500B for Stargate. If they make the better product and have it be free, wouldn't that severely hurt our AI market, and potentially our chip market? Not an expert on this so I wanted some opinions.

Yall heard the news. Chinese AI more efficient and cheaper. This is going to tank the American
Big Tech, they can’t deliver on the numbers they said they could now.

Our index funds/ETF are tech heavy. It will be a bloodbath! This is the correction and pullback that we all been waiting for.

Here we go: let’s buy the dip!!!! Who’s buying?!

Chinese artificial intelligence startup DeepSeek rocked global technology stocks Monday, raising questions over America’s technological dominance.

Buzz grew over the weekend about DeepSeek’s latest AI model being cost-effective while running on reduced-capability chips, casting doubt on the validity of the sky-high valuations for companies like Nvidia Corp. The Chinese firm’s product, released last week, is now at the top of Apple Inc.’s App Store rankings.

“DeepSeek shows that it is possible to develop powerful AI models that cost less,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers.”

Founded by quant fund founder Liang Wenfeng, the app’s underlying AI model is widely seen as competitive with OpenAI and Meta Platforms Inc.’s latest. Lauded by investor Marc Andreessen as “one of the most amazing and impressive breakthroughs,” DeepSeek’s assistant shows its work and reasoning as it addresses a user’s written query or prompt. Reviews on Apple’s app store and on Alphabet Inc.’s Android Play Store praised that transparency.

Nasdaq 100 futures tumbled as much as 1.9%, while contracts on the S&P 500 fell as much as 1%. The moves represent continued losses from Friday’s cash session, as US shares cooled after gains earlier in the week as President Donald Trump took office.

In contrast, stocks advanced in Hong Kong, with the Hang Seng Tech Index climbing as much as 2% ahead of Lunar New Year holidays this week. Chinese AI-related stocks including Merit Interactive Co. surged by their daily limits. Merit is among those with the clearest links to DeepSeek after stating in an earlier filing that it had incorporated the homegrown AI firm’s model into marketing.

Meanwhile, shares in the AI supply chain slumped as investors rethink their assumptions that the most advanced AI will require increasing amounts of computing power and energy. Major Nvidia supplier Advantest Corp., slid as much as 8.6% in Tokyo. Data centers shares also slipped, with Singapore-listed Mapletree Industrial Trust down 3.6%. Markets were closed for holidays in Taiwan and South Korea.

The DeepSeek product “is deeply problematic for the thesis that the significant capital expenditure and operating expenses that Silicon Valley has incurred is the most appropriate way to approach the AI trend,’ said Nirgunan Tiruchelvam, head of consumer and internet at Singapore-based Aletheia Capital. “It calls into question the massive resources that have been dedicated to AI.”

Kyle Rodda, senior market analyst at Capital.com, says the updated AI model unveiled by China’s DeepSeek raises concerns about geopolitical risks as well as questions about US tech stock valuations.

The decline in Nasdaq futures comes at the start of a big week for earnings from major tech companies including Apple and Microsoft Corp. Profit growth is expected to have slowed while valuations remain inflated, once again causing concern over the large AI-driven rally in the sector.

The Nasdaq 100 is trading at 27 estimated forward earnings, compared with its three-year average of 24 times. Nvidia is at 33 times, though that’s slightly down from its three-year average. Shares of Nvidia were more than 3% lower on the alternative trading system Blue Ocean in Asia morning, according to Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities

The DeepSeek release raises new doubts, challenging the notion that China’s AI technology is years behind US counterparts. Washington’s trade restrictions had kept the most cutting-edge chips out of China’s hands, but DeepSeek’s model was built using open source technology that is easy to access.

“While current leaders like Nvidia have a strong foothold, it is a reminder that AI dominance cannot be taken for granted,” said Charu Chanana, chief investment strategist at Saxo Markets. “The emergence of China’s DeepSeek indicates that competition is intensifying, and although it may not pose a significant threat now, future competitors will evolve faster and challenge the established companies more quickly. Earnings this week will be a huge test.”

Link: https://www.bloomberg.com/news/articles/2025-01-27/nasdaq-futures-slump-as-china-s-deepseek-sparks-us-tech-concern

The markets are overreacting to the DeepSeek news.

Nvidia and big tech stocks losing a trillion dollars in value is not realistic.

I personally am buying more NVDA stock off the dip.

So what is going on?

The reason for the drop: Investors think DeepSeek threatens to disrupt the US big tech dominance by enabling smaller companies and cost-sensitive enterprises with an open source and low cost, high performance model.

Here is why I think fears are overblown.

1. Companies like Nvidia, Microsoft, and other big tech firms have massive war chests to outspend competitors. Nvidia alone spent nearly $9 billion on R&D in 2024 and can quickly adapt to new threats by enhancing its offerings or lowering costs if necessary.

2. Nvidia’s dominance isn’t just about hardware—it’s deeply tied to its software ecosystem, particularly CUDA, which is the gold standard for AI and machine learning development. This ecosystem is entrenched in research labs, enterprises, and cloud platforms worldwide.

3. People have to understand the risk that comes with DeepSeek coming out of China. There will be major adoption barriers from key markets as folks worry about data security, sanctions, government overreach etc.

4. US just announced $500b to AI infrastructure via Stargate. The government has substantial resourcing to subsidize or lower barriers for brands like Nvidia.

Critiques tend to fall into two camps…

1. Nvidias margins are going to be eroded

To this I think we have to acknowledge that while lower margins and demand would impact the stock both of these are speculative.

Increased efficiency typically increases demand. And Nvidias customers are pretty entrenched, it’s def not certain they will bleed customers.

On top of that Nvidia’s profitability isn’t solely tied to selling GPUs. Its software stack (e.g., CUDA), enterprise services, and licensing deals contribute significantly. These high-margin revenue streams I would guess are going to remain solid even if hardware pricing pressures increase.

2. Open source has a number of relative advantages

I think open source is heavily favorited by startups and indie developers (Open source is strongly favored by Reddit specifically). But the enterprise buyer doesn’t typically lean this way.

Open-source solutions require significant internal expertise for implementation, maintenance, and troubleshooting. Large enterprises often prefer Nvidia’s support and commercial-grade stack because they get a dedicated team for ongoing updates, security patches, and scalability.

The chinese at DeepSeek released the weights of their model which is on par with the latest big proprietary models (chatgpt, gemini), but the inference cost is much much lower, even 3000 times lower (compared with some versions of chatgpt). Really good value per token processed. You can let it run for 5h to spend 1$, while with Claude the $ is finished in 10 minutes.

It seems like the cost of intelligence really goes down a lot, approaching 0. Well, not really, but a whole lot.

Now, I'm struggling to interpret what this means for the stock of AI companies which invested heavily in these models.

On one hand, AI really works and is progressing rapidly. Suggesting there are further benefits to get from AI.

On the other hand. The intelligence commodity is really cheap now. The DeepSeek model's weights are free. And it cost only 10M to train. AI companies which invested Billions on their models, just got their models superseded by a model which is now free for everyone. This is bigger news than the meta llama models, because this model now was trained really cheaply and the license says you can do whatever you like with it.

If the cost of intelligence will be 0, will the AI companies like Goog and msft make money out of their investments?

After the rise of AI Deepseek. Everyone is wondering will it affect Nvidia? We are not sure at all and can’t be predicted either.

We can only give suggestions about what could go wrong, if deepseek continues to raise?

Personally, I have used deepseek and the experience with deepseek has been way better than of using ChatGPT over the past few years.

I would personally avoid this week putting some money in it.

What do you guys think?

I don’t get sudden “panic” amidst emergence of some new technology from China.

So assume you have invested in Magnificent 7, all of which are based out of US granted. A Chinese ventures comes up with something cheaper but “comparable” when it comes capability in the Ai space. Generally speaking, A tech emerging from China will always have a negative sentiment in the stock exchange in the West due to security and censorship.

So given now there likely to be some “friendly” rivalry the logical thinking is that the respective govt in the US some of the other western countries are likely to ramp up effort to ensure they come up on top. People draw parallel to the first to moon race with this, but despite US getting there first with AI the investors seems have rattled by some news that Deepseek is “cheaper”. Goods which come out of China is usually cheaper and we don’t hit the panic mode when we see Huwei phone cost cheaper than Apple, do we?

Just because a Chinese tech company is coming up with something shouldn’t in this scenario affect the US stock this much. AI so relatively new that the size of the market is not yet definite, if anything it will exponentially grow with increasing use cases all around the world.

So someone please explain to me how an average investor has hit the panic button with this so flippantly?

If Deepseek's low training cost is not fake, who are the winners? Love to get everyone's take in case there's a big fire sale this week.

Mag 7 Winners

• Apple: This is where their lag in AI investment actually helps them. Now they can build better AI for their mobile devices, computers, home services, and their version of Omniverse at a much lower cost.

• Google, which invested in their own cheaper chips instead of the Nvidia chips. Also has the most integrated AI stack which means they have more ability to adapt.

• Amazon, same as Google but to a lesser degree.

Financial

• Cheaper model training cost means a lot more startups will gain meaningful access to AI, creating a lot more exciting use cases. More startup success means more M&A.

Software

• Cheaper model training cost also means the cost of companies running AI agents/software will also pay a lot less. They can pass on savings to customers, invest even more into R&D, and accelerate their agentic AI.

• Some picks off top of my head: Salesforce, cyber security stocks like PANW or Crowdstrike, Palantir, or just $IGV.

Healthcare / Drug Development

• There should be less demand for Nvidia chips, making it cheaper for these industries to gain more (and cheaper) access to GPU.

Related question: Is there an ETF that tracks S&P or Nasdaq but exclude chip stocks? Like variations of $SPXT? Because I think that's a good way to play this long term.

What Is China’s DeepSeek and Why Is It Freaking Out the AI World? https://www.bloomberg.com/news/articles/2025-01-27/what-is-deepseek-r1-and-how-does-china-s-ai-model-compare-to-openai-meta

DeepSeek, an AI startup just over a year old, stirred awe and consternation in Silicon Valley with its breakthrough artificial intelligence model that offered comparable performance to the world’s best chatbots at seemingly a fraction of the cost. Created in China’s Hangzhou, DeepSeek carries far-reaching implications for the global tech industry and supply chain, offering a counterpoint to the widespread belief that the future of AI will require ever-increasing amounts of power and energy to develop.

How do you think this was trained? Using their proprietary chipset? Haha

If anything, US companies will double down on training a better model. A lot of smaller companies can now enter the market due to low cost / low barrier to entry. And how do you think those model will be trained?

They are all using Nvidia chipset. If you didn’t know, now you know!

Sell all you can, because people who know will buy low so they can sell even higher.

Update: Found this article that says total REAL cost to train DeepSeek was in the region of 500M when taking into account other costs. This is far higher than what they claimed (6M) but still lot cheapr than OpenAI's $7b budget. https://www.interconnects.ai/p/deepseek-v3-and-the-actual-cost-of

Is it possible OpenAI was trying to maximise profit by taking advantage of their leading position (as they were under pressure to show some profit for a while). DeepSeek just showed the same (or better) think can be done lot cheaper.

The very gist of Deepseek is that it was able to develop a new AI model at a very quick turn around time and at a very reduced price.

however, its still using NVDA chips. it doesnt hurt NVDA at all. they can literally restrict supply chain. or just only continue to produce expensive flagships.

if Deepseeks tech caused companys that are also developing AI, such as Google, Open AI, MSFT, etc, that can somewhat make sense.

but i dont understand the hit on the company's thats designing/making the chips.

at the end of the day, they are still going to, and have to , rely on NVDA and TSM.

so why does this have an impact on NVDA?

Think for a moment, what has driven the US Stock Market over the previous couple of years? AI

Specifically, the idea that huge companies in USA had an AI lead so large that no one else could possibly compete. This lead to these companies spending billions (on things like Nvidia chips) and as a result, investors also pumped billions into these companies, driving the market up and up.

IF (and this is a big IF) Deepseek is the real deal, and initial analysis of it suggests that it truly is amazing, then this renders the billions of dollar spent wasted. A cut price AI job out of China beating these companies would destroy their so called massive moat which they spent billions and billions to create.

RKs timeline has continually been interpreted as including a market crash before the rip upwards.... if Deepseek interrupts Nvidia's dominance, the most important company in the world at the moment, then we all know how this is going to end. No doubt the market has been anxious around AI of late. The next couple of weeks could be very interesting!

Just incredible using lower end Nvidia chips and costing only $5mil to develop.

A lot of people are saying it cost 6M to train deepseek but the lowest estimate for GPUs used to train is 2000 h800 chips which alone cost 70M so i get that the training cost is 6M but they still needed 70M in hardware, now i get its more efficient in terms of GPU hours but shouldn’t that efficiency translate to more projects = more gpu time in the long run and bigger datacenters?

I'm still dubious of any claims that come out of China - I'll admit I haven't explored how it's been bench marked and by who - but if true it makes me worried about some of my stocks like AMD.

Think about it, it's opened source by the MIT license and I'm a HUGE believer in opensource... to a point. While there is a lot of mention about hardware innovations being part of the success. At the beginning of any opensource project advanced and efficient features and functionality come out fast, but in time that slows down out of human nature. It's cool to work on something new, but tweaking something that is now mainstream and you are one out of many instead of one out of few and lose interest. My point is look for some serious innovation coming out with Deepseek. Then again, they could have gone down a dead end path and that's as good as it gets. A lot of things are created with the intent to show they can match an achievement with far less cost, but in doing so they fine tuned their design to the point that that is all it can do.

Then we hit that pesky Moore's Law issue and is scaling really going to make that big of a difference? The magnificent 7 have each ordered 400k - 500k chips (mostly NVDA, sorry folks) GPU's. Is Deepseek going to make investors think, 'Whoa, you guys bought much more house than you need' and start backing out. The flip of that is if scaling isn't impacted by AI's version of Moores Law, then it was a good call and shit's about to get real.

So, if 55 million (or whatever the exact cost was) can get you to OpenAI ChatGPT 4o performance, you don't have to be crowned one of the Magnificent 7 to push out AI breakthroughs. Although I doubt the 55 million cost because I don't believe they are calculating the costs of the significant hardware innovations required.

The last thing I can come up with that worries me is energy consumption (are energy costs even factored into the costs of training a model). That worry is obvious.

So, again I ask, does anyone think the Deepseek is going to hurt AMD and other things all about building data centers

Deep Seek R1 version, Chinese Large Language Model, performed at par and in some specific cases (Math500) better than Chat GPT and Claude AI latest models spooked investors on nees that this model was trained on older versions of Nvidia [H800 and A100 chips] in a shorter time frame and with the assistance of a much smaller team.

This raised the questions of the necessecity of billions of $ tech spend and utility of high end Nvidia chips.

But there are still some unanswered questions:

1. Which training technique/database were utilised? Was the development completely organic (or there were some borrowing of modules, databases, codes etc)?

2. LLM need to scour pentabytes of data and utlilise deep machine learning to aquire a high performance. How Deep Seek was able to do so using (fewer) chips with lower processing and smaller memory?

3. Could Deep Seek had achieved still higher performance if they had utilised latest Nvidia H100 chips? [If so, then this should boost demand for Nvidia high end chips albiet with improves training and database]

Market punished Nvidia, Broadcom, TSM, and data center cooling technology providers (Modine and Vertiv). While left LLM developers (Meta, MSFT, Alphabet, Tesla) relatively unscathed.

Deep Seek organic development (if true) is a criticism of utilisation of resources (chips, databases and technologist) by US big tech. The fact that Deep Seek has stated that it used Nvidia chips (even if low end) may infact is a testament to its grip even on this lower AI segment (allowed for exports) of the market.