Washington (Business Desk): Recently, there has been a big change in the global artificial intelligence (AI) world, this is being said because Chinese startup DeepSeek launched a game-changing AI model. The low cost and great technology of this model of Deepseek created a stir in the Wall Street, while the Nasdaq also lost $1 trillion from its market value, raising apprehensions among people and companies about the sustainability of the AI boom in America.
According to reports, American chipmaker Nvidia, the leader in AI infrastructure, suffered the biggest one-day market cap loss ever, falling by about $600 billion in value. On the other hand, the Nasdaq Composite fell 3.1%, with Google’s parent company Alphabet losing $100 billion and Microsoft losing $7 billion.
Why so important?
DeepSeek’s success challenges the notion that AI’s impact depends largely on massive financial investment and cutting-edge technology. DeepSeek circumvented a US foreign trade blockade and came up with an AI system that rivals offerings from companies like OpenAI and Google at a much lower cost. This raises three important questions. First, is the US strategy of pouring billions of dollars into AI infrastructure sustainable? Can the multi-billion dollar valuations of US tech companies like Nvidia and Microsoft be justified in light of such efficient alternatives? And are US restrictions on China’s access to advanced chips like Nvidia’s H100 really effective?
The Nasdaq sell-off highlights how vulnerable the market is to changes in the AI narrative. As DeepSeek shows, new inventions are not always expensive, and it is not necessary that if something is expensive, it is the best. Gregory Allen, director of the Wadhwani AI Center at the Center for Strategic and International Studies, pointed out the political significance of DeepSeek’s timing.
$1 trillion wiped out in a day
The market movement on the announcement of DeepSec was very dangerous and fast. First Nvidia shares fell by 17%, wiping out about $600 billion in value. Then Alphabet fell by 4% and Microsoft by 2.1%, which put the tech sector in a vulnerable position for division. In addition, the Philadelphia Semiconductor Index fell by 9.2%, which was its biggest decline since the beginning of the COVID-19 pandemic. If we talk about global markets, its effect was seen there too, like European chipmaker ASML saw a decline of 7%.
