🚩Chinese DeepSeek AI debut pressures US technology sector. Wall Street at risk❓
The new week on financial markets begins with sharp declines in indices amid potential shifts in the balance of power within the rapidly developing artificial intelligence (AI) sector.
- Today's sell-off on Wall Street can be attributed to the debut of the AI model DeepSeek V3. The Chinese model has "shaken" the Nasdaq 100 index, driving futures down by over 2.5% at the start of the week.
- Today's declines are significant. Nvidia's stock is down 6.5% in pre-market trading, Microsoft is losing 3.3%, Bitcoin has dropped 5.4%, and the VIX fear index has surged by 9% during the same period.
The DeepSeek company claims to have spent approximately $6 million and only a few months to train the new AI model. This is just a fraction of the money and time that U.S. competitors had to invest to train the AI models developed by leading tech conglomerates. This has led some investors to question the justification for the enormous investments in AI development by U.S. firms. Despite previous beliefs that China was lagging in this field, the competition appears to have developed its technology far more cost-effectively and seemingly just as efficiently.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app- Reports suggest that the company used older-generation Nvidia H800 chips. Some sources indicate that DeepSeek, backed by the Chinese fund High Flyer Capital, may have used between 10,000 and 50,000 older Nvidia AI chips, despite U.S. export restrictions. Even in this scenario, the upper limit of these chips corresponds to only about 10% of those used by major American AI models like ChatGPT.
- The DeepSeek V3 model debuted on January 10 as an open-source platform. It is modifiable, and its inference process is transparent, unlike products from OpenAI and many other "Western" AI models.
- In contrast to OpenAI and other AI companies in the West, DeepSeek is expected to achieve profitability much faster and avoid reliance on "external funding injections."
- Recent market reports indicate that Big Tech is not ignoring DeepSeek. Its debut has drawn comments from prominent figures, including Microsoft CEO Satya Nadella and Chamath Palihapitiya, a former Facebook executive. Palihapitiya warned that DeepSeek's successful debut and quality might raise doubts about the need for continued "massive" investments in artificial intelligence.
- The latest data shows that DeepSeek has surpassed ChatGPT in downloads on the Apple Store. The model's debut may serve as a wake-up call for investors regarding the high valuations of American stocks. Wall Street may begin questioning whether the multi-billion-dollar investments in AI infrastructure are truly necessary.
US100 (H1 interval)
US100 is experiencing sharp losses this morning, testing the support zone around 21,400 points, which recently served as the upper boundary of a descending channel on the H1 timeframe. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.