The tech-heavy Nasdaq 100 lost almost $1 trillion in value yesterday after DeepSeek’s release of its low-cost R1 “reasoning” model led to the realization that the U.S. tech giants pouring billions of dollars into AI could get left in the dust by a Chinese competitor.
- The free and open-source R1 model is performing on par with Open AI’s o1 reasoning model, propelling DeepSeek to become the most downloaded free app for iPhone.
- DeepSeek says the model cost only $6 million to build – as little as 3% of o1’s estimated training price tag.
R1 comes on the heels of DeepSeek’s recent release of its V3 model that matches OpenAI’s GPT-4o. DeepSeek’s products are reportedly powered by Nvidia chips that are less advanced than those used by rivals, due to U.S. semiconductor export restrictions meant to preserve America’s AI edge. DeepSeek’s apparent ability to make due with less had shares of Nvidia nosediving 17% yesterday. Meanwhile, Alphabet and Microsoft stock dipped over 4% and 2% respectively.
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Market Recap Week of 01/21/2025 to 01/24/2025