Chinese AI startup DeepSeek‘s $6 million AI model has rattled global global markets, with experts warning it signals a major shift in AI competition.
What Happened: Speaking with Benzinga, experts suggest the Chinese startup’s efficiency-focused approach is reshaping perceptions of dominance in artificial intelligence, challenging the high-cost strategies employed by US tech giants like OpenAI and NVIDIA NVDA.
The model, R1, was developed for under $6 million, according to the company, and has outperformed established competitors in several tests.
Its open-source approach has triggered concerns about the future competitiveness of US technology firms and their spending-heavy AI strategies.
The announcement sent jitters through the markets, with the Nasdaq Composite dropping 2.7%, the S&P 500 sliding 1.6%, and the Dow Jones Industrial Average dipping 0.1%.
DeepSeek’s claims of achieving high-performance AI at a fraction of Silicon Valley’s costs have raised fears of an AI stock bubble bursting.
Crypto markets succumbed to the pressure as well.
Bitcoin BTC/USD slid about 5.5% in trade today, trading at $99,450, while Ethereum ETH/USD was trading down 7% in trade at $3,070.
Other major altcoins like Solana SOL/USD, BNB BNB/USD, Dogecoin DOGE/USD and Cardano ADA/USD were trading down 11%, 3.5%, 9% and 8.5%, respectively.
Also Read: MicroStrategy’s Bitcoin Buying Spree Continues, Accumulates Over 10,000 BTC
What Experts Are Saying: Azeem Khan, co-founder of Morph, called DeepSeek a disruptor, likening its strategy to China’s democratization of smartphones in the 2010s.
“DeepSeek proves that scaling AI doesn’t need hundreds of billions of dollars. By cutting costs, they’re challenging the West’s dominance in the field,” he said.
Khan also highlighted that China’s open-source approach, backed by state resources, signals a significant departure from Western prestige projects.
“DeepSeek showcases China’s ability to disrupt industries with precision and efficiency,” he added.
Mario Casiraghi, co-founder of Singularity Finance, noted that DeepSeek’s architecture—focused on reinforcement learning and efficiency—delivers comparable performance to GPT-4 while undermining the competitive edge of companies like NVIDIA.
“This challenges the assumption that high compute costs are necessary for dominance, creating jitters in the equity and crypto markets,” he explained.
DeepSeek represents a broader strategic shift in Chinese AI, prioritizing efficiency, state coordination and real-world application.
Dariia Porechna, Head of Protocol at Autonomys, emphasized that DeepSeek’s success reflects a new wave of Chinese innovation. “This is not just about technology. It’s a strategic message: China can compete globally while overcoming resource constraints,” she said.
However, challenges remain.
Ken Timsit, Head of Cronos Labs, pointed out that China’s reliance on Western semiconductor technology and global trust deficits could limit its ability to capture significant market share in Western countries.
“Foundational models are just one part of the equation. Fine-tuning, inference infrastructure, and geopolitical concerns will play critical roles,” Timsit said.
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