Nvidia Corporation (NASDAQ:NVDA) shares fell notably in overnight Robinhood trading on Sunday as China's DeepSeek unveiled an AI model that reportedly offers cutting-edge performance at a fraction of the cost. This development has sparked doubts about the need for massive GPU investments.
What Happened: DeepSeek, backed by Chinese quant firm High-Flyer, launched its R1 language model (LLM) as open source last week. It also published a technical report asserting that advanced AI systems can be developed on substantially smaller budgets.
What stands out is DeepSeek's ability to achieve competitive results with less funding and technology compared to industry leaders like OpenAI, Meta Platforms, Inc. (NASDAQ:META), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL).
DeepSeek reportedly used roughly 50,000 Nvidia H100 GPUs. However, the extent of this hardware usage remains unclear.
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Over the weekend, DeepSeek's R1 model became a sensation on social media with several tech experts reacting to the company and its model. Here are some reactions:
Billionaire investor Chamath Palihapitiya took to X, formerly Twitter, and highlighted a report written by Jeffrey Emanuel, the founder of YouTube transcript optimizer.
He underscored a portion of the report that detailed how DeepSeek essentially cracked one of the holy grails of AI: step-by-step reasoning without massive datasets.
28-year-old Alexandr Wang, who is the CEO of Scale AI and has made history as the youngest self-made billionaire in the world, also took to X and said, "DeepSeek is a wake-up call for America."
Wang stated that the U.S. must focus on out-innovating and accelerating progress while strengthening chip export controls to maintain its lead.
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AI engineer Shubham Sahoo highlighted that DeepSeek R1 is open-source and 96.4% more affordable than OpenAI's o1 model, offering comparable performance.
Perplexity CEO Aravind Srinivas congratulated DeepSeek on reaching #1 on the App Store. “For a while, it wasn’t clear who would beat ChatGPT for the first time. The best we could manage was #8, a year ago,” he posted on X.
Jasmine Sun, former Substack product manager, commented on DeepSeek's ability to outperform Western counterparts in writing tasks.
Price Action: On Friday, Nvidia shares dropped 3.12% to close at $142.62, with an additional decline of 0.42% in after-hours trading, according to Benzinga Pro data.
Despite the decline, NVDA has gained 3.12% year-to-date and an impressive 133.69% over the past 12 months.
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Photo Courtesy: KhunkornStudio via Shutterstock.com
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
