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You are here: News Journos » Tech » What is DeepSeek, and why is it causing Nvidia and other stocks to slump?
What is DeepSeek, and why is it causing Nvidia and other stocks to slump?

What is DeepSeek, and why is it causing Nvidia and other stocks to slump?

News EditorBy News EditorFebruary 19, 2025 Tech 6 Mins Read

The emergence of a new Chinese artificial intelligence company called DeepSeek has stirred significant interest and concern in the U.S. tech sector. This development is particularly noteworthy as experts suggest that DeepSeek’s technology may rival that of established players like OpenAI. With remarkable low development costs and a growing user base, DeepSeek’s debut has sparked a notable sell-off in AI-related stocks, raising questions about the future of AI investments from American companies.

Article Subheadings
1) Understanding DeepSeek
2) Availability of DeepSeek’s Technology
3) Distinguishing Features of DeepSeek
4) Privacy Concerns Surrounding DeepSeek
5) Implications for Nvidia and the Tech Market

Understanding DeepSeek

DeepSeek emerged in July 2023, founded by Liang Wenfeng, an alumnus of the prestigious Zhejiang University and a hedge fund manager with significant assets. The company was developed with an initial financial outlay of only $6 million—stunningly low compared to the anticipated $1 trillion investment by U.S. companies in AI-related technologies over the next few years. This raises questions about the efficacy of traditional business models and the potential market disruption that low-cost technologies can create.

Previously, Ives had noted that Liang had amassed a considerable “stockpile of Nvidia A100 chips,” the usage of which has now been restricted due to export regulations. This unique positioning allows DeepSeek to leverage high-end technology that is no longer available to most players in the industry. The development ethos of DeepSeek aims to make advanced AI accessible and competitive with established entities such as OpenAI and Google, thereby captivating both users and investors.

Availability of DeepSeek’s Technology

DeepSeek’s AI application quickly ascended to the top of Apple’s App Store, indicating a swift and unexpected market reception. As of Monday morning, the app became available for free, capturing the attention of users eager to explore a potentially revolutionary tool. However, the app faced challenges, including a temporary suspension of new user registrations due to “large-scale malicious attacks,” which the company attributed to vulnerabilities in the rollout.

In a bid to manage the influx of users, DeepSeek’s communication indicated that existing customers could continue accessing the service seamlessly. Despite these obstacles, the rapid uptake demonstrates a substantial interest in a product that analysts have compared favorably to other established technologies, reinforcing the notion of fast-paced innovation in the AI space.

Distinguishing Features of DeepSeek

DeepSeek distinguishes itself with its open-source large language model, which employs a strategy termed “inference-time computing.” This approach essentially conserves significant computational resources by activating only the necessary parts of its model for user queries, resulting in substantial cost and energy efficiencies. Industry voices, including notable investors, have highlighted the application as a critical innovation in AI, representing a pivotal moment in the industry landscape.

However, skepticism also surrounds DeepSeek’s potential to establish itself firmly in the U.S. market. Analysts, including Ives, express doubts about major companies adopting a solution from a Chinese startup for critical AI infrastructure. While recognizing the technological advancements, there is a prevailing sentiment that traditional players like Nvidia continue to hold a decisive advantage in the broader context of AI development and deployment.

Privacy Concerns Surrounding DeepSeek

The rapid rise of DeepSeek has also triggered concerns regarding user privacy. The company’s data collection practices—storing sensitive information such as keystrokes, audio inputs, and personal identifiers on servers located in China—mirror controversies associated with companies like TikTok, which has faced scrutiny in the U.S. over its data handling. Critics of DeepSeek warn that its operations pose similar risks to national security, igniting broader discussions about data sovereignty and consumer protections in a globalized digital economy.

The compounded concerns around personal data practices and geopolitical implications warrant careful consideration, especially as regulatory frameworks grappling with tech ownership and user privacy continue to evolve. Given the current climate, these challenges could hinder DeepSeek’s acceptance within critical markets, potentially impacting its growth trajectory despite strong technological underpinnings.

Implications for Nvidia and the Tech Market

The ramifications of DeepSeek’s emergence are notably felt across Wall Street, with established tech companies such as Nvidia witnessing profound stock market repercussions. Following DeepSeek’s launch, Nvidia stock plummeted significantly, shedding 17% of its value, which translates to a staggering $600 billion loss—the most considerable one-day decline in stock market history. Such shifts prompt market analysts to reevaluate existing valuations of tech stocks buoyed by AI promises.

The broader implications extend to the question of whether investors might be disproportionately investing in companies with inflated valuations. Analysts are challenged to reassess viability amid increasing competition and novel entrants like DeepSeek that can deliver comparable technological outcomes at a fraction of the traditional costs. The emerging narrative suggests a need for investors to exercise caution in correlating AI potential with organizational strength or market leadership.

No. Key Points
1 DeepSeek’s funding and founding details highlight significant market disruption potential.
2 The app has quickly gained popularity, raising concerns about stability and security.
3 DeepSeek’s innovative technology offers compelling cost and energy efficiencies.
4 The company faces significant scrutiny regarding user privacy and data collection practices.
5 Market reactions signal broader concerns over potential saturation and overvaluation in AI stocks.

Summary

The emergence of DeepSeek marks a critical moment in the competitive landscape of artificial intelligence, with implications for both users and the broader tech market. As Wall Street grapples with the fallout from a disruptive, lower-cost alternative to established AI technologies, concerns over privacy and security underscore a need for diligent evaluation of emerging players in the sector. The interplay between innovation, market dynamics, and regulatory oversight remains to be seen as the technology community reflects on DeepSeek’s implications for the future.

Frequently Asked Questions

Question: What is DeepSeek?

DeepSeek is a private Chinese artificial intelligence company focused on developing an AI application that competes with technologies from established players like OpenAI.

Question: How does DeepSeek’s technology work?

DeepSeek utilizes an open-source large language model and inference-time computing to optimize resource usage, activating only necessary sections of its model based on user queries.

Question: What privacy concerns are associated with DeepSeek?

Experts are raising alarms over DeepSeek’s data collection practices, including storing sensitive user information on servers in China, potentially exposing users to privacy risks similar to those associated with TikTok.

Artificial Intelligence Blockchain causing Cloud Computing Consumer Electronics Cybersecurity Data Science DeepSeek E-Commerce Fintech Gadgets Innovation Internet of Things Mobile Devices Nvidia Programming Robotics slump Software Updates Startups Stocks Tech Reviews Tech Trends Technology Virtual Reality
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