DeepSeek is making Wall Street nervous about the AI spending boom: Here’s what we know

Published On Jan 27, 2025, 4:53 PM

DeepSeek, a Chinese AI startup, has emerged as a formidable competitor to American AI technologies, causing significant concern among investors and US tech companies. Their new AI model, DeepSeek-R1, has gained popularity and is outperforming US rivals like OpenAI's ChatGPT while costing considerably less to develop (less than $6 million compared to $100 million for OpenAI). This suggests a potential shift in the AI landscape, questioning the high spending by US tech giants and raising concerns over American tech superiority.

Stock Forecasts

NVDA

Negative

The emergence of DeepSeek as a competitor highlights the vulnerability of US tech stocks, particularly companies heavily invested in AI technology. As skepticism rises about the need for expensive AI chips and models, investor confidence in American tech could diminish, impacting stock prices.

MSFT

Negative

Microsoft's and Alphabet's dependency on AI technology raises concerns following DeepSeek's launch. If investors begin to see these companies as less innovative due to cheaper alternatives, they could decrease their holdings in these stocks, thereby affecting their price significantly.

AVGO

Negative

Broadcom, heavily involved in the supply of chips for AI technologies, may see a decline in demand as the market adapts to lower-cost AI solutions. This shift could lead to underperformance in Broadcom's stock in the near term.

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