{"id":218315,"date":"2025-02-05T10:00:00","date_gmt":"2025-02-05T15:00:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=218315"},"modified":"2025-02-06T03:54:02","modified_gmt":"2025-02-06T08:54:02","slug":"deepseeks-ai-shockwave-hits-nvidia-hard-wiping-out-billions","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/stocks\/deepseeks-ai-shockwave-hits-nvidia-hard-wiping-out-billions\/","title":{"rendered":"DeepSeek\u2019s AI Shockwave Hits NVIDIA Hard, Wiping Out Billions"},"content":{"rendered":"\n<p>The artificial intelligence (AI) revolution is moving at lightning speed, and one of the biggest stories from last week underscores just how critical the technology has become\u2014not just for Silicon Valley, but for America\u2019s national security and global competitiveness.<\/p>\n\n\n\n<p>Enter DeepSeek, a Chinese AI startup that\u2019s sent shockwaves through the market with the release of a new, highly cost-efficient AI model.<\/p>\n\n\n\n<p>While DeepSeek may not yet be a household name, its impact has been swift. NVIDIA\u2014the dominant player in AI chip design and, as of this morning, the world\u2019s third-largest company by market cap\u2014saw its stock price tumble after DeepSeek\u2019s latest model demonstrated a level of efficiency that many on Wall Street fear could challenge America\u2019s AI supremacy.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-nvidia-s-wild-ride\"><strong>NVIDIA\u2019s Wild Ride<\/strong><\/h2>\n\n\n\n<p>To understand why DeepSeek is making headlines, let\u2019s look at NVIDIA\u2019s market swings. Last Monday, the tech giant lost an astonishing $590 billion in market value. Tuesday saw a rebound of $260 billion, only to drop again by $130 billion on Wednesday. The company plunged 15.8% for the week, its worst weekly showing since September 2022.<\/p>\n\n\n\n<p>Why the volatility? DeepSeek\u2019s AI model, built at a fraction of the cost of leading U.S. models, signals the potential for a new price war in AI. Unlike OpenAI\u2019s ChatGPT and Meta\u2019s Llama models\u2014trained on expensive high-end semiconductors\u2014DeepSeek has developed an alternative that is allegedly&nbsp;<a href=\"https:\/\/am.jpmorgan.com\/content\/dam\/jpm-am-aem\/global\/en\/insights\/eye-on-the-market\/deepseek-amv.pdf\">45 times more efficient<\/a>&nbsp;than its competitors. Its final training run cost only $5.6 million, compared to the vastly higher sums required for U.S.-made models.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"900\" height=\"423\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/02\/COMM-cost-vs-performance-AI-models-01312025.png\" alt=\"Cost VS Performance of Select AI Models\" class=\"wp-image-218317 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/02\/COMM-cost-vs-performance-AI-models-01312025.png 900w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/02\/COMM-cost-vs-performance-AI-models-01312025-700x329.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/02\/COMM-cost-vs-performance-AI-models-01312025-300x141.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/02\/COMM-cost-vs-performance-AI-models-01312025-768x361.png 768w\" data-sizes=\"(max-width: 900px) 100vw, 900px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 900px; aspect-ratio: 900\/423;\" \/><\/figure>\n\n\n\n<p>For many investors, this raises big questions: Will AI\u2019s profit margins shrink as efficiency increases? Are NVIDIA\u2019s high-priced AI chips at risk of being undercut?<\/p>\n\n\n\n<p>Most importantly, what are the implications for aerospace and defense, where AI is becoming an essential tool in modern warfare and national security?<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-ai-is-now-a-matter-of-national-security\"><strong>AI Is Now a Matter of National Security<\/strong><\/h2>\n\n\n\n<p>DeepSeek\u2019s breakthrough isn\u2019t just a financial story\u2014it\u2019s a national security issue. President Donald Trump wasted no time responding, saying DeepSeek should be a&nbsp;<a href=\"https:\/\/www.datacenterdynamics.com\/en\/news\/trump-chinas-deepseek-a-wakeup-call-for-us-ai-firms\/\">\u201cwake-up call\u201d for Silicon Valley.<\/a>&nbsp;Supporting AI development, including the data centers that power it, is no longer just about business\u2014it\u2019s a matter of strategic importance.<\/p>\n\n\n\n<p>That may be partly why, in his second week back in office, Trump announced the launch of Stargate, a&nbsp;<a href=\"https:\/\/openai.com\/index\/announcing-the-stargate-project\/\">$500 billion joint AI venture<\/a>&nbsp;led by SoftBank and OpenAI. Backed by Oracle and MGX, Stargate intends to invest $100 billion immediately into AI infrastructure in the U.S. The goal? To cement America\u2019s leadership in AI and keep its edge in technological warfare and cybersecurity.<\/p>\n\n\n\n<p>But, as some analysts and investors are pointing out, if the Chinese can match American AI\u2019s performance at a fraction of the cost, is $500 billion too high?<\/p>\n\n\n\n<p>In any case, the Stargate development should catch the attention of investors looking at aerospace and defense. AI-driven military applications, from autonomous drones to advanced cyber defense, are not just science fiction anymore. They\u2019re already reshaping global conflict. The ability to train AI models more efficiently could shift the balance of power in how wars are fought, how intelligence is gathered and how cybersecurity threats are handled.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-big-tech-s-ai-arms-race-heats-up\"><strong>Big Tech\u2019s AI Arms Race Heats Up<\/strong><\/h2>\n\n\n\n<p>Meanwhile, American tech giants are doubling down on AI investments. Mark Zuckerberg&nbsp;<a href=\"https:\/\/www.facebook.com\/zuck\/posts\/10116307989894321?ref=embed_post\">posted on Facebook<\/a>&nbsp;that 2025 will be a \u201cdefining year for AI,\u201d with Meta planning to invest $60\u2013$65 billion in AI infrastructure alone. The company expects to double its GPU (graphics processing unit) capacity to 1.3 million chips by the end of next year, significantly ramp up AI hiring and bring 1 gigawatt (GW) of computing power online.<\/p>\n\n\n\n<p>The AI boom is already creating massive economic ripples. According to Sensor Tower, revenues for AI chatbot and AI art generators have skyrocketed from $30 million in 2022\u2014the year ChatGPT was launched\u2014to nearly&nbsp;<a href=\"https:\/\/sensortower.com\/blog\/2025-state-of-mobile-consumers-usd150-billion-spent-on-mobile-highlights\">$1.3 billion in 2024,<\/a>&nbsp;representing an incredible 4,100% increase. Sensor Tower reports that the U.S. leads the world in AI monetization, accounting for 45% of global revenue, while China lags at just 2%.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/02\/COMM-global-ai-apps-01312025.png\" alt=\"Global AI Apps Are Now A Billion-Dollar Industry\" class=\"wp-image-218316 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-deepseek-s-security-risks-raise-red-flags\"><strong>DeepSeek\u2019s Security Risks Raise Red Flags<\/strong><\/h2>\n\n\n\n<p>While DeepSeek has proven technically impressive, it\u2019s also raised serious red flags.<\/p>\n\n\n\n<p>For one, Microsoft and OpenAI are investigating whether DeepSeek acquired data from ChatGPT in an unauthorized manner.<\/p>\n\n\n\n<p>And two, cyber intelligence firm KELA has already exposed&nbsp;<a href=\"https:\/\/www.kelacyber.com\/blog\/deepseek-r1-security-flaws\/\">major security vulnerabilities in DeepSeek\u2019s R1 model,<\/a>&nbsp;showing that it can be easily manipulated to generate malicious content, including ransomware instructions, fake news fabrication and even details on explosives and toxins.<\/p>\n\n\n\n<p>For this reason, U.S. military service members have been&nbsp;<a href=\"https:\/\/www.cnbc.com\/2025\/01\/28\/us-navy-restricts-use-of-deepseek-ai-imperative-to-avoid-using.html\">warned not to use DeepSeek AI tools<\/a>&nbsp;due to potential security risks.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-investors-should-watch-next\"><strong>What Investors Should Watch Next<\/strong><\/h2>\n\n\n\n<p>Despite legitimate concerns, I agree with UBS that DeepSeek\u2019s emergence&nbsp;<a href=\"https:\/\/www.ubs.com\/us\/en\/wealth-management\/insights\/market-news\/article.1847323.html\">does not derail the overall AI growth story.<\/a>&nbsp;As its editorial team notes, AI is not a zero-sum game. A more cost-efficient model could actually accelerate adoption across industries, further fueling productivity gains and market expansion.<\/p>\n\n\n\n<p>For investors, this means keeping an eye on how AI is reshaping aerospace and defense. The biggest beneficiaries may not be the AI application companies themselves, but rather the firms building the infrastructure: semiconductor manufacturers, data centers, cloud computing providers, cybersecurity firms and defense contractors integrating AI into next-generation applications.<\/p>\n\n\n\n<p>With the U.S. making AI a national priority, we\u2019re seeing an unprecedented wave of investment into the sector. Whether it\u2019s OpenAI\u2019s partnership with Stargate, Meta\u2019s multi-billion-dollar AI expansion or defense firms using AI for military innovation, the message is clear: AI isn\u2019t just the future of tech\u2014it\u2019s the future of national security.<\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p>Originally Posted February 3, 2025 &#8211; <a href=\"https:\/\/www.usfunds.com\/resource\/deepseeks-ai-shockwave-hits-nvidia-hard-wiping-out-billions\/\">DeepSeek\u2019s AI Shockwave Hits NVIDIA Hard, Wiping Out Billions<\/a><\/p>\n\n\n\n<p><br>All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this\/these website(s) and is not responsible for its\/their content.<\/p>\n\n\n\n<p>Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (12\/31\/2024):&nbsp;NVIDIA Corp, Microsoft Corp.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The artificial intelligence (AI) revolution is moving at lightning speed, and one of the biggest stories from last week underscores just how critical the technology has become\u2014not just for Silicon Valley, but for America\u2019s national security and global competitiveness.<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[6,8,9,22,26,3],"tags":[],"contributors-categories":[13633],"class_list":{"0":"post-218315","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-north-america","7":"category-region","8":"category-securities","9":"category-stocks","10":"category-text-articles","11":"category-traders-insight","12":"contributors-categories-us-global-investors"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>DeepSeek\u2019s AI Shockwave Hits NVIDIA Hard, Wiping Out Billions<\/title>\n<meta name=\"description\" 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