Chinese artificial intelligence company DeepSeek has shaken global financial markets, causing over $1 trillion in losses across U.S. tech stocks and impacting the cryptocurrency sector. The turmoil follows the unexpected launch of DeepSeek’s R-1 model, developed for just $5.6 million in under two months, significantly undercutting the cost of AI models from OpenAI and Google.
DeepSeek’s AI has surpassed OpenAI’s ChatGPT in multiple benchmarks, quickly becoming the top-ranked app in both U.S. and Chinese marketplaces. The company, founded in May 2023 and backed by hedge fund High-Flyer, has also released an open-source Janus-Pro-7B model, reportedly rivaling OpenAI’s DALL-E 3.
The stock market reacted sharply, with NVIDIA’s shares plummeting 21% as concerns arose that DeepSeek’s advancements could reduce demand for high-end AI chips. Speculation has intensified after Tesla CEO Elon Musk suggested DeepSeek might have accessed 50,000 undisclosed NVIDIA H100 chips despite U.S. export restrictions.
Crypto markets mirrored the sell-off, as investors reduced exposure to risk assets ahead of the Federal Reserve’s upcoming interest rate decision. Analysts, however, believe decentralized AI protocols could benefit long-term from DeepSeek’s efficiency breakthroughs, making blockchain-based AI services more accessible.
Meanwhile, the U.S. government has launched a national security probe into DeepSeek, citing concerns over technology transfer and intellectual property. The move follows a stark contrast in reactions from U.S. leadership, as President Trump previously praised the firm’s technological achievements.
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