DeepSeek’s Cheap AI Solution Raises Red Flags for Nvidia Investors

The release of DeepSeek, a Chinese AI company’s new model, has caused ripples in the stock market, especially among U.S. tech giants.

DeepSeek’s AI model is said to have been developed at a fraction of the cost compared to its American counterparts, sparking fears over AI spending and its impact on Nvidia and other key players.

While DeepSeek’s model was trained using Nvidia GPUs, the company claimed it spent only $5.6 million on Nvidia’s technology, which could signal that U.S. tech firms may be able to reduce their AI costs by adopting cheaper solutions.

This development threatens Nvidia’s market position, as its high-end GPUs are crucial to the development of AI systems, fetching prices as high as $25,000.

Investors are concerned that if U.S. companies follow DeepSeek’s cost-efficient approach, it could undermine Nvidia’s booming profits, which surged from $4.8 billion in 2022 to an estimated $66.7 billion in 2024.

The stock market reacted strongly, with Nvidia shares rising 5.89% amid broader market declines, but the long-term impact remains uncertain.