The AI startup has upended the industry by developing a model that costs much less to produce – and is available free to a universe of tinkerers
Nothing cheers up a tech columnist more than the sight of $600bn being wiped off the market cap of an overvalued tech giant in a single day. And yet last Monday that’s what happened to Nvidia, the leading maker of electronic picks and shovels for the AI gold rush. It was the biggest one-day slump for any company in history, and it was not alone – shares of companies in semiconductor, power and infrastructure industries exposed to AI collectively shed more than $1tn in value on the same day.
The proximate cause of this chaos was the news that a Chinese tech startup of whom few had hitherto heard had released DeepSeek R1, a powerful AI assistant that was much cheaper to train and operate than the dominant models of the US tech giants – and yet was comparable in competence to OpenAI’s o1 “reasoning” model. Just to illustrate the difference: R1 was said to have cost only $5.58m to build, which is small change compared with the billions that OpenAI and co have spent on their models; and R1 is about 15 times more efficient (in terms of resource use) than anything comparable made by Meta.
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