Discover DeepSeek: The Chinese AI Startup Shaking Up the Market and Outranking OpenAI

Essential Insights

• U.S. AI stocks experienced a selloff after Chinese AI startup DeepSeek’s app became the most-downloaded free app on Apple’s U.S. platform, overtaking OpenAI’s ChatGPT.
• DeepSeek claims its newest AI model rivals top American AI technologies, developed at a fraction of the usual cost.
• Despite market jitters, analysts suggest this dip might be an opportunity for investors to acquire undervalued AI stocks.

Shares of major AI chipmakers like Nvidia (NVDA) and other AI-related companies declined as DeepSeek’s AI assistant gained rapid popularity.

DeepSeek’s app topped Apple’s App Store free downloads in the U.S., although it ranked lower on Google Play. This highlights its growing influence in the AI sector and the market.

What Is DeepSeek and Why Is It Disrupting the AI Industry?

Founded in 2023 by hedge fund manager Liang Wenfeng in Hangzhou, China’s tech hub, DeepSeek is making waves with its advanced AI technology.

The company’s latest R1 AI model, launched recently, reportedly matches the performance of OpenAI’s ChatGPT. Impressively, its V3 base model was developed in just two months for under $6 million, contrasting sharply with the multi-billion-dollar investments by U.S. AI giants amid export restrictions on advanced chips.

This rapid progress challenges existing beliefs about the cost and infrastructure necessary for competitive AI development, potentially reshaping the AI landscape and impacting major tech companies.

Nvidia praised DeepSeek’s innovation as an exemplary case of test time scaling, highlighting its significance in AI advancements.

Market Impact: DeepSeek Sparks Selloff in Chip and Energy Stocks

The Nasdaq dropped over 3% as investors sold shares in AI-related sectors, including chip manufacturers like Nvidia, Broadcom (AVGO), AMD (AMD), and international players such as TSMC (TSM). The PHLX Semiconductor Index (SOX) fell more than 9%, with hardware and networking companies like Dell, Hewlett Packard Enterprise, and Arista Networks also declining.

Energy stocks, particularly those linked to nuclear and renewable energy firms anticipating AI-driven demand growth—such as Vistra, Constellation Energy, Oklo, and NuScale—also saw losses.

Conversely, consumer staples experienced gains, indicating a shift in market sentiment.

Analysts View Market Reaction as Temporary and See Buying Opportunities

Several experts consider the selloff an overreaction. Bernstein’s Stacy Rasgon maintained an “outperform” rating on Nvidia, while Citi analysts upheld a “buy” recommendation, expecting sustained AI chip demand.

Wedbush analysts expressed skepticism about U.S. companies adopting Chinese AI infrastructure but acknowledged DeepSeek’s consumer-focused model launch as notable. They labeled the selloff a “golden buying opportunity” for stocks like Microsoft, Alphabet, and Palantir, key players in the American AI ecosystem.

Update – Jan 27, 2025: This article has been revised to include the latest market data and insights.

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