Nvidia and DeepSeek

Audrey Tan ‘27

In late January, NVIDIA stock experienced a crash out, which was caused by DeepSeek. DeepSeek, an open source AI model designed to enhance machine learning capabilities, put the world into shock as it performs nearly as well or better than the current AI models, costs a fraction to make and train, and doesn't rely on human feedback to provide answers. This breakthrough not only posed a direct challenge to NVIDIA’s existing AI technologies but also sparked fears of a shift in the AI landscape. NVIDIA is a graphic processing unit company that is used for computer applications such as the gaming industry, robotics, and most importantly the leading player in graphics processing and AI technology. 
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In late January, NVIDIA stock experienced a crash out, which was caused by DeepSeek. DeepSeek, an open source AI model designed to enhance machine learning capabilities, put the world into shock as it performs nearly as well or better than the current AI models, costs a fraction to make and train, and doesn't rely on human feedback to provide answers. This breakthrough not only posed a direct challenge to NVIDIA’s existing AI technologies but also sparked fears of a shift in the AI landscape. NVIDIA is a graphic processing unit company that is used for computer applications such as the gaming industry, robotics, and most importantly the leading player in graphics processing and AI technology. 
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Investors became concerned that DeepSeek's capabilities could lead to a decrease in demand for NVIDIA's high-end GPUs, which are essential for training and deploying traditional AI models.The startup's launch of a free, open-source large language model raised alarms, with analysts noting that DeepSeek claimed it was developed "in just two months at a cost of under $6 million," significantly less than what Western companies typically invest. Sam Altman stated that Chat GPT cost more than $100 million to develop. Moreover, the competitive advantage offered by DeepSeek, with its cost-effective development and efficiency, raised questions about NVIDIA's future profitability and market share. This situation highlighted the fragility of tech dominance in the fast-evolving AI sector, where innovations can rapidly alter where innovations can rapidly alter the competitive landscape. For instance Alibaba’s new AI that launched recently on Lunar new year, Qwen 2.5, basically outperforms Chat GPT -4.0, Llama-3.1-405B, and even Deepseek-V3. 

Investors reacted swiftly to the news, resulting in a sharp decline in NVIDIA's stock price. “Nvidia shares plunged 17% on Monday, resulting in a market cap loss of close to $600 billion, the biggest drop ever for a U.S. company.” (CNBC). Analysts suggest that the company's ambitious projections for DeepSeek may have contributed to heightened expectations, making the current problems even more pronounced. NVIDIA recently experienced a significant downturn in its stock value, raising concerns among investors and tech enthusiasts alike. 

NVIDIA’s CEO, Jensen Huang, addressed the situation in a recent press conference, stating, “We acknowledge the challenges we are facing with DeepSeek and are committed to resolving them as quickly as possible. Our team is working diligently to ensure the product meets the high standards we set for ourselves.”

Despite the setback, many industry experts remain optimistic about NVIDIA’s long-term prospects. The company has a strong track record of innovation and resilience, and some analysts believe that with the right adjustments, DeepSeek could still fulfill its potential.
As NVIDIA navigates this rocky phase, the future of DeepSeek remains uncertain. The tech world will be watching closely to see how the company responds and whether it can regain the confidence of its investors and customers.

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