No one thought the path to artificial general intelligence (AGI) would be smooth for investors, but the emergence of DeepSeek has clearly thrown a plot twist into the AI narrative.
Nvidia (NVDA -3.67%) and other AI stocks plunged on Monday, Jan. 27, as investors responded to the threat from DeepSeek, the Chinese AI chatbot that rivals top models like ChatGPT for a fraction of the cost.
Nvidia lost 17% in one session, wiping out $600 billion in market value, the biggest one-day loss for a single stock in market history. Since then, Nvidia has recouped some of those losses, a sign investors may believe the sell-off may have been an overreaction.
Nonetheless, AI stocks remain significantly lower, and Nvidia itself tipped its hat to the Chinese start-up, with a spokesperson calling it “an excellent AI advancement.”
DeepSeek also seems to be gaining credibility, as Microsoft, which is believed to be OpenAI’s biggest investor, has already added the model to its Azure cloud infrastructure service.
So how big of a threat is DeepSeek to the AI ecosystem? To answer that question, let’s outline a few facts about DeepSeek first.

Image source: Nvidia.

What we know about DeepSeek
DeepSeek is a Chinese AI start-up founded by hedge fund chief Liang Wenfeng in May 2023. Unlike OpenAI’s ChatGPT or Alphabet’s Gemini, DeepSeek uses an open-source large language model, meaning developers can update it and adapt it to their own needs.
DeepSeek is significant because its R1 model rivals OpenAI’s o1 in categories like math, code, and reasoning tasks, and it purportedly does that with less advanced chips and at a much lower cost.
According to one estimate, it costs OpenAI’s o1 model $60 to generate a million tokens of output, while DeepSeek’s R1 can deliver the same quantity for just $2.19.
DeepSeek has impressed industry insiders with a 22-page research paper explaining how its model works, but the company has also been accused by OpenAI of using a method called distillation to build its models, a cost-efficient way of training an AI model using larger, more adept ones. Doing so constitutes a violation of OpenAI’s terms of service.
Distillation is commonly used in AI, but if that accusation is true, it would seem to undermine a lot of DeepSeek’s credibility, making it seem like the Chinese start-up plagiarized at least part of its model.
There’s also a debate over how much DeepSeek actually paid for its infrastructure, as it said it cost just $5.6 million to train its V3 model. The V3 was built on Nvidia H800s, which were made to get around U.S. export rules and perform similarly to H100s, Nvidia’s GPUs that have been widely used to build AI infrastructure and models in the U.S.
Analysts have cast doubt on the $5.6 million figure, and that doesn’t seem to include essential costs like research, architecture, or data, making it difficult to do a direct comparison with U.S-based AI models that have required billions of dollars in investments.
What it means for Nvidia
It’s too early to know what the implications of DeepSeek are for Nvidia and the broader AI sector, and there’s still a lot of uncertainty around what exactly DeepSeek has achieved.
The company appears to have made genuine gains in efficiency, but those seem less impressive if its model was built in part by borrowing from OpenAI. The true cost of the model also isn’t fully clear.
The DeepSeek-R1 launch was called a “Sputnik moment” by Silicon Valley honcho Marc Andreessen and others, and the geopolitical implications of the new chatbot could be just as meaningful as the technological ones.
The U.S. could respond by intensifying the tech cold war with China, tightening export rules further and taking other measures. Additionally, allowing DeepSeek on U.S. smartphones while banning TikTok seems incongruous, and U.S. corporations and governments are likely to be skeptical of handing their data over to a Chinese start-up.
For Nvidia investors, it’s also worth remembering that this is just one episode in a years-long technology evolution, and is probably not as meaningful as a $600 billion one-day sell-off makes it seem. Even if DeepSeek shifts the entire industry to a more efficient open-source architecture, that could be a positive for Nvidia over the long run. According to Jevons paradox, lowering the price to run AI models could increase demand, leading to an increase in total consumption, which would drive more purchases of AI chips from Nvidia, though likely at a lower cost.
It’s also meaningful that DeepSeek was built on Nvidia chips. No one’s challenging its supremacy there.

Why I’m not worried about Nvidia
Investors shouldn’t miss the forest for the trees here. You should remember that a competent AI chatbot isn’t the goal here. The ultimate goal is artificial general intelligence, including applications like autonomous vehicles and robotics, and it’s unclear if DeepSeek dramatically changes the calculus around that.
Those technologies are powerful and valuable enough that the race toward AGI will continue, and the tech giants competing in it will continue to pour billions into the infrastructure necessary to build it. Efficiency is important, but technological leadership is the real prize here.
Nvidia stock was already dealt a setback by DeepSeek, and that could be true of Nvidia’s business as well, but the company has proven itself to be nimble before.
It’s evolved its technology to go from primarily serving video games to cryptocurrency mining, AI, autonomous vehicles, 3D rendering, and more. CEO Jensen Huang is rightly regarded as a visionary in the industry, and it continues to rapidly innovate with its new Rubin platform in development.
The AI frontier will continue to evolve, and Nvidia will adapt to market conditions as needed. Whatever the impact of DeepSeek, the race to AGI isn’t going away, and neither is Nvidia.

DeepSeek shocked the world with its new AI offering, which it developed for $5 million, contrasting sharply with the billions that OpenAI, Microsoft, and Google spent developing theirs. Result: a $1 trillion bloodbath on Wall Street and an assumption-assaulting moment heard worldwide.

While DeepSeek’s claims have yet to be verified, gone in a nanosecond is the assumption that the US is ahead of China in the AI arms race. Gone, too, is the assumption that only big tech firms with deep pockets can dominate the AI space.

The larger point here is that we now live in a world where making assumptions or going along unthinkingly with conventional wisdom can lead us into the jaws of disruption. In the Age of Acceleration, we can choose to challenge our assumptions, or somebody else will do it for us. (If they do, it won’t be pretty.)

As an innovation coach and futurist, I teach managers the techniques of identifying and “assaulting” individual, organizational, and big-picture assumptions, often called paradigms. I explain that assumptions are what everybody believes to be true … until it isn’t, as DeepSeek appears to have demonstrated. And I show how innovation begins where assumptions end.

Challenging assumptions is essential, whether personal (“I’m too old/young to do that”), organizational (“that’s not how we do things around here”), or national (“America is way out ahead in AI”).

One technique is to ask open-ended questions and invite new thinking. For example: “what’s a better way to do X?” is such a challenging question because it opens the mind to the realization that the way we do X currently might be obsolete.

In researching a book about navigating a world of hyper-change, I realized we will all need to build muscle mass in this area. The world is moving too fast to harbor erroneous assumptions. We are now living through an “inflection point” that is unlike anything in history. Over the coming decade, there will be more social, technological, and geopolitical change than over the past 100 years. And we are not ready for this world of constant overdrive.
The forces that will characterize this period are becoming clearer: the rise of authoritarianism both in the United States and globally; the pervasiveness of social media and the diminishment of freedom and human consciousness; China vs. the USA race for world dominion; and, most importantly, the burgeoning AI Revolution.
We now live in a world of exponential change, a clear departure in the human experience. Something that happens in a lab in Wuhan explodes into a global pandemic. And something that happens in a startup lab in China wipes out a trillion dollars in market value overnight. In such a world, assumptions are like barnacles on the side of a boat.
DeepSeek not only vaporizes assumptions we may have made about AI but also the future of humanity. One such assumption is that AI will lead us into the promised land. Silicon Valley promulgates this assumption with passionate intensity. It is techno-determinism writ large: If we can invent it, it must be a good thing for society.
But all too often, while technology brings about clear and immediate benefits – it has unintended consequences that become evident over time.
In 2011, 23 percent of teenagers in the United States and Western countries owned a smartphone, meaning they had only limited access to social media; most had to use the family computer to access the internet. But by 2016, 79 percent of teens owned a smartphone, as did 28 percent of children ages eight to 12. Teens indicated they spent an average of almost seven hours a day on screens. Researchers found that one out of every four young people admitted that they were “almost constantly” online. This meant that they spent far less time playing with, talking to, touching, or even making eye contact with their friends and families, according to researchers. Instead, they withdrew from “embodied social behaviors” essential for successful human development.
As researchers such as Jonathan Haidt and others have observed, signs of a mental health crisis began to emerge. Rates of mental illness among the young shot up dramatically in many Western countries between 2010 and 2015. Major depression among teens went up 145 percent among girls, and 161 percent among boys. A similar rise in anxiety disorders occurred.
Will AI have similar benefits and unintended consequences? Champions of AI see positive progress and productivity.
“Every person will have an AI assistant, coach, mentor, trainer, advisor, and therapist who is infinitely patient, infinitely compassionate, infinitely knowledgeable, and infinitely helpful,” observes Marc Andreessen in a widely read essay on why AI will save the world. “Your AI assistant will be present through all of life’s opportunities and challenges, maximizing every person’s outcomes.”
Perhaps AI will lead us to the promised land, but only if we challenge our assumptions, and consciously shape the future.