DeepSeek: The "Satellite Moment" has amazed high-tech champions.

The free AI assistant DeepSeek, launched last week by a Chinese startup, utilizes less data at a fraction of the cost of existing services. By Monday, the DeepSeek assistant had surpassed its American competitor ChatGPT in app store downloads from Apple.

This news led to a decline of more than 3% in the high-tech NASDAQ index. Notably, the leading AI chip maker Nvidia was among the weakest performers, with its shares dropping over 17%.

Nvidia was on track to lose $600 billion in market value, marking the largest one-day loss for the company, according to LSEG data, and more than doubling the previous record for a one-day loss set by Nvidia in September of last year.

The second-largest drop in NASDAQ was seen by chipmaker Broadcom Inc., which fell by over 18%. Following that was Microsoft, which supports ChatGPT, down by 2.3%. Google's parent company Alphabet also dropped by 3.4%.

"If it's true that DeepSeek is the so-called 'better mousetrap,' it could disrupt the entire AI narrative that has been driving markets for the past two years," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

"This could mean lower demand for chips, reduced need for massive energy production to power models, and less requirement for large-scale data centers. However, it could also indicate that AI becomes more accessible and helps spur the development of a wide range of useful applications," he added.

Optimism about AI has been rampant on Wall Street in recent years, notes Reuters.

• After the release of the first Chinese equivalent of ChatGPT, created by search giant Baidu, there was widespread disappointment in China regarding the AI capability gap between American and Chinese firms.
• However, the apparent quality and economic efficiency of DeepSeek's models have changed that, and executives and engineers in Silicon Valley have showered praise on DeepSeek-V3 and DeepSeek-R1.
• DeepSeek-R1, released last week, is reported to be 20-50 times cheaper to use than OpenAI's model o1, depending on the task, according to a post on DeepSeek's official WeChat account.
• The launch of the free open-source AI model by the Chinese startup DeepSeek to compete with OpenAI's ChatGPT strikes a blow to the tech sector. Reuters cites venture capitalist Marc Andreessen from Silicon Valley, who stated on social media platform X last Sunday that DeepSeek's R1 model was a "Sputnik moment" for AI, referring to the launch of the former Soviet Union's satellite that marked the beginning of the space race in the late 1950s.
• "DeepSeek R1 is one of the most amazing and impressive breakthroughs I have ever seen, and as open source, it is a huge gift to the world," he said in a separate post.
• However, Daniel Morgan, senior portfolio manager at Synovus Trust Company, which owns nearly a million shares of Nvidia, described the sell-off on Monday as an overreaction.

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