Until January 27, 2025, when this Chinese startup appeared out of the blue to shake the very foundations by wiping $1.12 trillion off the market value of leading American tech companies.
Nvidia was hit quite badly by this as it lost its market cap top slot. At one go, Nvidia's worth fell by $300 billion, a heavy 16% fall.
So, who is DeepSeek?
This upstart company, founded in 2023, announced plans on Monday to develop an open-source AI model outperforming that of both Nvidia and OpenAI at a cost 20 to 50 times lower.
Why is this a game-changer for industry giants?
While Nvidia's chips are expensive and positioned as integral to the creation of sophisticated language models, DeepSeek took a different route. It used H800 chips, which are neither top of the line nor noted for their robustness. In any case, DeepSeek is confident these chips can successfully power the third version of their language model that went live on January 10.
Main Point
This is that kind of situation which shows how surprise can be an effect of innovation. There was a situation where access to chips by Nvidia is restricted in China, and there has to be much more options and at cheaper rates. It is a principle in the development of technology-to make more with less.
DeepSeek's budget-friendly AI model, of quality, does pose a big challenge for American firms such as Nvidia, finding their place in the fast-changing, competitive market.
