America’s superinflated tech stocks had seemed due for a correction for months, but the trigger has come from an unexpected source. The latest large language model from China’s artificial intelligence start-up DeepSeek may not be quite a “Sputnik moment”. There are parallels, even so, with the early space race, when ingenuity helped Soviet engineers keep pace with and sometimes surpass US rivals, despite their relative lack of computing power and cutting-edge technologies. The US went on to win the Moon race, and establish a sustainable edge in space. But DeepSeek’s breakthrough upturns the assumptions that have underpinned US tech valuations, of an unassailable supremacy in AI that would be extended by spending billions of dollars on chips and infrastructure.
DeepSeek’s achievement is to have developed an LLM that AI experts say achieves a performance similar to US rivals OpenAI and Meta but claims to use far fewer — and less advanced — Nvidia chips, and to have been trained for a fraction of the cost. Some of its assertions remain to be verified. If they are true, however, it represents a potentially formidable competitor.
First, like Meta of the US but unlike OpenAI or Google’s Gemini, it is open source — ready to share the recipe for its secret sauce rather than keep it locked away in hope of extracting maximum financial gain. That makes it appealing for developers to use and build on. Second, it can be put together on much more of a shoestring budget and with much less computing power. This explains Monday’s plunging stock prices not just of front-line tech companies but of those that make chip equipment and supply electrical hardware for data centres.