How the Buzz Around Chinese Ai Model Deepsek Sparked A Massive Nasdaq Sell-Off

A young chinese ai startup, deepseek, sparked a massive rout In us technology stocks monday as its highly competition-And potentially shockeing Re Spending on Artificial Intelligence.

Deepsek’s emergence is shaking up investor confidence in the Ai Story that has been lifting the us bull market the past two years. It calls into question The Hype Around Nvidia’s Chips And rippled all the way through the market to hit shares of Power producers Who was set to get a boost from ai data center demand.

Here’s how the deepsek-triggered market sel-off on Wall Street Unfolded:

New reasoning model

Deepseek was founded in May 2023 by Liang Wenfeng, Who Partly Funded The Company by his AI-Powered Hedge Fund. In late December, the Ai Developer Launched a free, open-source lots language model that it said Took only two months to develop and less than $ 6 million to build.

On Jan. 20, The Hangzhou, China-Based Deepsek Released R1, A Reasoning Model that Outperformed Open AI’s Latest O1 Model In Many Third-Parthy Tests.

Deepsek is looking to differentiate from its competitors with its reasoning capabilites, meaning that that before delivering the final Answer, the model first generates a “Chain of thought” To enhance the accuracy of its responses.

Top-Performing Model

The Buzz Around Deepsek’s R1 Seemingly Picked Up Steam after Alexandr Wang, CEO of Scale AiTouted its competitiveness against the best products from the US megacap tech giants, which was thought to be leading the ai war. Scale AI provides data to help companies train their ai tools.

“What we found is that Deepsek, which is the leading chinese ai lab, their model is actually the top performing, or rooughly on par with the best American models,” Wang said on cnbc from the World Economic Forum In Davos, Switzerland, Last Week.

Wang Said Deepsek Actually has more H100 Chips from Nvidia Than Expected – About 50,000 of Them. Theose chips are The processor of choice For ai firms in the US such as OpenaiAnd the us has banned the sale of advanced ai chips to china.

Nvidia shares took a 3% Hit Friday as Chatter about Deepsek Started to Pick Up.

No. 1 app

Over the weekend the Hype surrounding Deepsek Reached a Fever Pitch on Social Media.

Marc AndressenCo-founder and general partner of venture capital firm andressen hrowitz, sang Deepsek’s praises on X, Saying The R1 Model is “One of the Most Amazing and Impressive Breakthroughs” Andreessen’s Portfolio Includes Airbnb and Dozens of Ai Companies.

Tech investor Chamath palihapitiya On x pointed to Deepseek’s “very good” Report, which said its r1 model “essentially cracked one of the holy grips of ai: getting models to reason steps to reason . “

By this point, Deepsek’s Mobile App surged to the top of Apple‘S app store download charts over the weekend in the US, marking a tangible threat to pricier models such as openai’s Chatgpt,

Us futures were down big overnight Sunday and investors woke up to a Sea of ​​Red Monday Morning.

Ai Darling and Chip Producer Nvidia Saw Shares Tumbling 16.9% on Monday for its Worst Day Since March 2020.

Other chipmakers as well as power provides were hit big. The tech-heavy Nasdaq composite was down more than 3% on Monday, dragged down by megacap names.