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The US tech industry is quaking in its boots right now, and while Donald Trump thinks the emergence of China's DeepSeek AI could be a good thing, tell that to everyone else.
Although the President of the United States hopes that China's attempt to undercut its US counterparts will help kick Silicon Valley into action, others are warning that the artificial intelligence bubble could be about to burst in America.
There's been a flurry of activity since OpenAI launched ChatGPT in November 2022, but with questions about whether it's over-inflated the market value of some big tech companies, things are looking pretty rocky over on Wall Street.
DeepSeek has already overtaken ChatGPT to become the most downloaded free app in the USA, and with it, the stock market is starting to fluctuate. The first major casualty is Nvidia, which was stung for $593 billion on January 27. This record-breaking loss was the largest single-day market cap ever recorded for a US company.
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Nvidia just lost $589 billion in market cap.
— Brew Markets (@brewmarkets) January 27, 2025
It's the biggest one-day loss in stock market history. pic.twitter.com/LNbkVJSfvh
Speaking to the Financial Times, billionaire investor Ray Dalio has warned that this could be a crucial turning point for the AI boom: "Pricing has got to levels which are high at the same time as there’s an interest rate risk, and that combination could prick the bubble."
More than this, Dalio has noted similarities between the AI boom and the dot-com bubble of the '90s. With the mainstream adoption of the World Wide Web, companies were earning big until the dot-com crash of 2000.
Dalio added: "Where we are in the cycle right now is very similar to where we were between 1998 or 1999.
"In other words, there’s a major new technology that certainly will change the world and be successful. But some people are confusing that with the investments being successful."
The tech-focused Nasdaq 100 index might've doubled in 1999, but by October 2022, this had plummeted by 80%. Dalio isn't alone in noticing the Nasdaq 100 has also doubled since the start of 2023 - all while the likes of Nvidia have soared.
There's plenty of intrigue surrounding DeepSeek, which lists co-founder Liang Wenfeng as its majority shareholder.
The DeepSeek-V3 model was launched on January 10 and supposedly trained for under $6 using Nvidia's H800 chips. DeepSeek's R1 model is apparently 20 to 50 times cheaper to run than OpenAI's o1 model, which is sure to have OpenAI's Sam Altman sweating a little.
Altman has already highlighted ludicrous running costs as to why the $200-a-month ChatGPT Pro is running at a loss.
As for what happens next, Dalio said in 2024: "The key question isn’t whether or not I should invest in China so much as how much."
He thinks this isn't just about gaining superiority in AI, suggesting we need to look at the bigger picture: "The tech war between China and the US is far more important than profitability, not only for economic superiority, but for military superiority."
“Those who are going to pay attention to profitability with sharp pencils are not going to win that race."
With hundreds of billions being funneled into AI tech on Wall Street and questions about returns, President Trump's launch of the $500 billion Stargate project will hopefully raise the market instead of just a few eyebrows.
