DeepSeek Shakes Up AI and Chip Industry

With the emergence of DeepSeek causing sharp declines in stock prices for chip manufacturers, it’s easy to view this new artificial intelligence (AI) technology as a menace – at least in the short-term. However, this development could hold a silver lining for the future of innovation.

 DeepSeek: A New Player

Developed by a Chinese startup, DeepSeek is an AI model that, according to the Seattle Times, “distinguishes itself from other chatbots such as ChatGPT by articulating its reasoning before delivering a response to a prompt.” The DeepSeek-R1 model is now available to the public, although CNBC reported yesterday that registrations were limited due to malicious attacks on its services.

DeepSeek’s Impact on the Stock Market

The emergence of DeepSeek has led to plummeting stock prices for chip manufacturers like NVIDIA, which had previously seen significant gains during the recent AI boom. Many existing AI applications depend heavily on advanced chips and other hardware to deliver the substantial computational power they require. This reliance has driven significant investment in the semiconductor industry, fueling its rapid growth.

However, with the startling news that DeepSeek was able to make its product “using far fewer Nvidia chips than U.S. firms,” as reported by Reuters, investors immediately began to question the viability of heavy investment in chips.

The breakthrough of DeepSeek was achieved despite (or perhaps in spite of), the United States’ attempts to restrict China’s access to chips. This past December, the US implemented its third wave of chip limitations in an attempt to neuter China’s ability to use AI for military applications.

Silicon Valley’s Response

If DeepSeek’s claim that it trained its model for under $6 million are true, it’s not exactly a fact that tech companies can afford to overlook. As Azeem Azhar, a leading expert on AI’s impact upon society, colorfully explains in his Exponential View newsletter: “This is the remarkable, jaw-drop, moment. The ‘holy hell! What have we been doing?’ that is echoing around Silicon Valley and beyond right now. It fundamentally shifts the ROI equation.”

In a Wired article, Will Knight writes that that while some paint DeepSeek as evidence that American companies are losing their edge, DeepSeek also illuminates a path forward for smaller firms. It’s proof that they too can develop advanced AI capabilities like reasoning – without having to invest in “increasingly exorbitant amounts of computing resources.”

Azhar sounds a similarly optimistic note in his newsletter. He envisions that the lower cost and efficiency of models like DeepSeek could lead to collaborative AI networks capable of tackling complex challenges such as climate modeling and financial market simulations.

Hear Azeem Azhar at ProMat 2025 

Want to learn more about how AI can revolutionize manufacturing and supply chains? Azeem Azhar will deliver a keynote titled “The AI Opportunity for Supply Chains” at ProMat 2025 in Chicago on March 18.

He is one of four keynotes at ProMat 2025, the premier event for the supply chain and manufacturing industry. To gain insight from thought leaders such as Azhar, register now to attend ProMat 2025 for free.

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