By Mauro Orru
Global chip stocks slumped Monday after Chinese artificial-intelligence company DeepSeek said it had developed AI models that nearly matched American rivals despite using inferior chips, raising questions about the need to spend huge sums on advanced gear provided by Nvidia and other tech giants to train AI models.
DeepSeek said last week that the performance of its latest R1 model was on par with OpenAI's o1-mini model that the ChatGPT maker released in September. The announcement came after DeepSeek said in a late-December report that it used a cluster of more than 2,000 Nvidia chips to train its other V3 model, compared with the tens of thousands of chips that are normally used for training models of a similar size.
The company said training one of its latest models cost $5.6 million, compared with the $100 million to $1 billion range cited last year by Dario Amodei, chief executive of AI company Anthropic.
DeepSeek's models, both in the top 10 on popular ranking platform Chatbot Arena, sparked a Monday selloff led by chip stocks amid concerns that lower costs to run the models could undermine demand for increasingly sophisticated semiconductors.
The tech-heavy Nasdaq Composite index shed more than 3% in early afternoon trading. Nvidia shares slumped more than 15%, with Micron Technology down 10% and Advanced Micro Devices down 6%. Shares of OpenAI backer Microsoft fell more than 3%. Power stocks--sensitive to AI news given the need for electricity to fuel data centers--also fell. GE Vernova shares fell 20%, while Vistra shed 27%.
In Europe, shares of Siemens Energy and Schneider Electric closed down 20% and 9.5% respectively. Meanwhile, shares of Dutch semiconductor-equipment maker ASML Holding closed 7% lower, wiping out more than $15 billion from its market value. In Asia, shares of chip-making equipment supplier Tokyo Electron closed nearly 5% lower.
"There is a new AI challenger in town and investors are spooked at what they've discovered," AJ Bell investment director Russ Mould wrote in a note to clients. "Its assistant is free to use and runs off lower-cost chips and less data--implying a major challenger to the established AI names in the West."
DeepSeek's cheaply trained models come despite export curbs that Washington leveraged in an effort to limit the sale of advanced AI chips that Beijing could use to advance its military capabilities.
DeepSeek's perceived success risks intensifying the AI war between the U.S. and China, Quilter Cheviot's Ben Barringer said in a note to investors, particularly after the recent announcement of Stargate--a joint venture between OpenAI, SoftBank Group, Oracle and MGX to build data centers in the U.S. for OpenAI.
News Corp, owner of Dow Jones Newswires and The Wall Street Journal, has a content-licensing partnership with OpenAI.
Kathleen Brooks, research director at XTB, said in market comments that the sharp decline in AI stocks indicates U.S. tech giants might be losing their dominance premium. "If China is catching up quickly to the U.S. in the AI race, then the economics of AI will be turned on its head," she said.
Write to Mauro Orru at mauro.orru@wsj.com
(END) Dow Jones Newswires
January 27, 2025 12:09 ET (17:09 GMT)
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