Nvidia Corporation 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. META, Microsoft Corporation MSFT, and Alphabet Inc. GOOG GOOGL.
DeepSeek reportedly used roughly 50,000 Nvidia H100 GPUs. However, the extent of this hardware usage remains unclear.
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.
This report is long but very good.
“With R1, DeepSeek essentially cracked one of the holy grails of AI: getting models to reason step-by-step without relying on massive supervised datasets. Their DeepSeek-R1-Zero experiment showed something remarkable: using pure reinforcement…
— Chamath Palihapitiya (@chamath) January 26, 2025
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.
DeepSeek is a wake up call for America, but it doesn’t change the strategy:
– USA must out-innovate &race faster, as we have done in the entire history of AI
– Tighten export controls on chips so that we can maintain future leadsEvery major breakthrough in AI has been American
— Alexandr Wang (@alexandr_wang) January 26, 2025
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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.
DeepSeek R1 is 100% Opensource and 96.4% cheaper than OpenAI o1 while delivering similar performance.
OpenAI o1: $60.00 per 1M output tokens
DeepSeek R1: $2.19 per 1M output tokensPeople with $200 ChatGPT subscription, let that sink in. pic.twitter.com/yLnSDOGRzL
— Shubham Saboo (@Saboo_Shubham_) January 21, 2025
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.
Congrats to @deepseek_ai for getting to #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. Look forward to using all their models for search, assistant, and agents this year. pic.twitter.com/WpVR3TFA0t
— Aravind Srinivas (@AravSrinivas) January 27, 2025
Jasmine Sun, former Substack product manager, commented on DeepSeek’s ability to outperform Western counterparts in writing tasks.
for fun I dumped the same bullet points into ChatGPT, Claude, and DeepSeek and asked each to draft an essay
r1 blew the others out of the water. it’s 10x less lobotomized and has 10x more flair
first time I’ve actually thought “wow the AI can write” (samples below)
— jasmine sun (@jasminewsun) January 26, 2025
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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