How DeepSeek Created the Buying Opportunity of a Lifetime in AI Stocks
Last week, AI stocks had their worst day in recent memory after a new Chinese AI model, dubbed DeepSeek—a Chinese version of ChatGPT that is nearly as good but supposedly cost 95% less to develop—sparked fears that companies may not need to spend as much on creating new AI models as previously thought.
AI powerhouse Nvidia (NVDA) dropped more than 15%. A variety of other AI stocks—such as Nebius, Credo, Vistra (VST), Constellation Energy (CEG), Astera Labs (ALAB), Lumentum (LITE), Fabrinet (FN), and Ciena (CIEN)—plunged between 20% and 40% in a single day.
It felt like the AI bubble was bursting.
But it wasn’t. Instead, the DeepSeek drama earlier this week simply created a generational buying opportunity in top-tier AI stocks.
To understand why, we first have to break down what happened.
The Impact of DeepSeek’s Cost-Effective Model on AI Stocks
Tech stocks—and in particular, AI stocks—crashed after DeepSeek, a Chinese AI startup, released a new AI model that could represent a disruptive paradigm shift in foundational AI models.
The DeepSeek model functions similarly to ChatGPT. It is a chatbot with complex reasoning capabilities—and it is very good. The app has quickly become the most downloaded in the United States, and early users broadly believe it is as good as (if not slightly better than) ChatGPT.
But here’s the real kicker: DeepSeek is significantly cheaper than ChatGPT.
Training ChatGPT-4 reportedly cost about $80 million. Google’s (GOOGL) Gemini Ultra reportedly cost nearly $200 million. Broadly, incumbent foundational AI models in the U.S. have required $100 million or more to train.
The Final Word
The tech world has spoken. DeepSeek’s compute efficiency breakthroughs will be a net positive for the AI industry.
That, of course, means the huge drop we saw in AI stocks this week is nothing more than a golden buying opportunity.
This article was originally published on this site
