Global tech stocks rattled by DeepSeek a new Chinese AI chatbot

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Huge U.S. technology companies that soared amid an artificial intelligence frenzy last year are getting pummeled after a little-talked-about Chinese startup demonstrated a chatbot that it says rivals versions from OpenAI and Google, and for a fraction of the cost.

An AI company called DeepSeek said it has developed a large language model that can compete with U.S. giants. It’s a new kind of chatbot that rivals some of the leading models from Google, OpenAI and Anthropic.

DeepSeek seemed to come out of nowhere, barely noticed in tech circles until mid-January. But experts say it’s not entirely a surprise.

“It was clear that they were one of the leading shops in China, but is a very small outfit that basically achieved some remarkable AI capabilities. And also another thing that’s remarkable about it is that they did so with very much less resources than some of the big tech firms. And so that’s why it’s caused a big of an upset because people thought that it wouldn’t really be possible to build such a good AI unless you were big tech. And so it has changed people’s perception on the industry a little bit,” says Carsten Jung, Head of Macroeconomics and AI at the Institute for Public Policy Research (IPPR).

DeepSeek’s app had already hit the top of Apple’s App Store chart, and analysts said such a feat would be particularly impressive given how the U.S. government has restricted Chinese access to top AI chips.

Skepticism, though, remains about how much DeepSeek’s announcement will ultimately shake the AI supply chain, from the chip makers making semiconductors to the utilities hoping to electrify vast data centers running those chips.

“AI is becoming cheaper. It is becoming better. And progress is continuing to increase… But DeepSeek definitely is now in the game and people will use it, but not for everything,” says Jung.

DeepSeek’s disruption also rocked AI-related stocks worldwide.

In Amsterdam, Dutch chipmaking equipment company ASML slid 7%. In Tokyo, Japan’s Softbank Group Corp. lost 8.3% to pull closer to where it was before leaping on an announcement trumpeted by the White House that it was joining a partnership to invest up to $500 billion in AI infrastructure.

This article was provided by The Associated Press.

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[Opening of NYSE]

[Laptop showing the DeepSeek website for demonstration purposes]

Carsten Jung (interview): “It was clear that they were one of the leading shops in China, but is a very small outfit that basically achieved some remarkable AI capabilities. And also another thing that’s remarkable about it is that they did so with very much less resources than some of the big tech firms. And so that’s why it’s caused a big of an upset because people thought that it wouldn’t really be possible to build such a good AI unless you were big tech. And so it has changed people’s perception on the industry a little bit.”

[Phone showing the DeepSeek app for demonstration purposes]

Carsten Jung (interview): “AI is becoming cheaper. It is becoming better. And progress is continuing to increase. Models are continuing to get better, even though a while ago people thought that it might stop in 2024, but it has accelerated. And so I think we’re in a place where there’s a larger and larger range of tools for people to choose from. But DeepSeek seemingly definitely is now in the game and people will use it, but not for everything.”

[Dow trading board]

[Exteriors of the Computex 2024 venue showing a sign for Nvidia]

[NVIDIA CEO Jensen Huang on stage for his Computex 2024 keynote speech]

Fiona Cincotta (interview): “The fact that the market hasn’t really been prepared for this news or these latest developments, I think is reflected by this big sell off that we’re seeing. You know, Nvidia is on track for its worst daily performance in history. We’ve seen a massive sell off the Nasdaq, the U.S. tech focussed index. We’ve seen the volatility gauge on Wall Street. The fear index is in its highest level since mid-December. So, you know, we’re seeing these big reactions, but I think this is a knee jerk reaction. It’s just a reflection of the surprise that we’re seeing in the market as investors struggle to, or rush, should I say, to price in this latest development and news.”

[Exteriors of Meta headquarters]

Fiona Cincotta (interview): “It’s just really almost pulled the carpet out, if you like, under this AI trade, which has been rallying across 2024 and really has had quite an easy ride so far. This is the first time that it feels that there has really been a disruption to the potential outlook for AI or particularly those firms such as Nvidia, who has really benefited from the run up so far.”

[Google Cloud offices, people walking and riding bikes]

[Google signs at company headquarters]

This script was provided by The Associated Press.

The related lesson for this video will be published next Wednesday.