Nvidia Stock Dips After China’s DeepSeek Launches Budget-Friendly AI Model

Overview of Recent Events: Nvidia Corporation NVDA experienced a significant drop in overnight trading on Robinhood. This decline followed the introduction of DeepSeek’s new AI model, which is said to provide top-tier performance at a much lower cost than existing options. This advancement has raised questions about the necessity of high investments in GPU technology.

Details of the New AI Model: DeepSeek, supported by the Chinese quantitative firm High-Flyer, released its open-source R1 language model (LLM) last week. A technical report from the firm claims that advanced AI can be developed on considerably smaller budgets than previously estimated.

Notably, DeepSeek has achieved competitive performance using less funding and technology than major players like OpenAI, Meta Platforms, Inc. META, Microsoft Corporation MSFT, and Alphabet Inc. GOOG GOOGL.

Reports suggest that approximately 50,000 Nvidia H100 GPUs were utilized by DeepSeek, though details on how this hardware was employed remain ambiguous.

Industry Reactions: Over the weekend, reactions to DeepSeek’s R1 model flooded social media, sparking discussions among tech experts. Billionaire investor Chamath Palihapitiya shared insights on X (formerly Twitter), emphasizing a report by Jeffrey Emanuel, the creator of a YouTube transcript optimizer.

Palihapitiya highlighted that DeepSeek seems to have achieved a breakthrough in AI: accomplishing step-by-step reasoning without relying on vast datasets.

In a similar vein, Alexandr Wang, the CEO of Scale AI and the youngest self-made billionaire, remarked on X that DeepSeek’s emergence is a “wake-up call for America.” He urged the U.S. to double down on innovation while enforcing stricter chip export regulations to stay competitive.

Cost Efficiency Spotlight: AI engineer Shubham Sahoo pointed out that DeepSeek’s R1 model is open-source and is 96.4% less expensive than OpenAI’s o1 model, while providing similar performance.

DeepSeek’s recent success is underlined by Perplexity CEO Aravind Srinivas congratulating them on reaching number one in the App Store. He noted that for a time, it was uncertain who would dethrone ChatGPT.

Performance Comparison: Commenting on DeepSeek’s innovative edge, Jasmine Sun, a former product manager at Substack, shared her experience comparing the writing capabilities of various models, concluding that DeepSeek outperformed the rest significantly.

Stock Movement: Nvidia shares closed down 3.12% at $142.62 on Friday, with an additional decline of 0.42% in after-hours trading, according to Benzinga Pro data. Despite the recent drop, NVDA remains up 3.12% year-to-date and has surged 133.69% over the past year.

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Photo Courtesy: KhunkornStudio via Shutterstock.com

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.