New Writing: In the wake of a Chinese chatbot launch that made US tech stocks flash red as investors fled, SustMeme Editor Jim McClelland asks: What will this market reset mean for the wider business world?
All good things must come to an end, eventually. For the ‘tech bros’ in the US and their joyriding bankrollers around the globe, January 27, 2025, marked the day the music died.
Or so it seemed when news first broke of a game-changing chatbot launch by a relatively little-known artificial intelligence (AI) company based in Hangzhou, China: DeepSeek.
Free to use, cheap to train
Established as recently as 2023, the company is privately owned by entrepreneurial Founder and CEO Liang Wenfeng, a previously low-profile hedge-fund billionaire.
What suddenly thrust his firm into the spotlight was the rapid release of its R1 large-language model. This catapulted it into a position to shake-up the status of monopolistic market-leaders such as ChatGPT, developed by California-based Star Child OpenAI.
The big differentiator is cost. Being open-source software, DeepSeek is free to download; but it is also cheaper to train, much cheaper. This is what really put the markets in a spin.
Down one trillion dollars in a day
In what new President Trump called a ‘wake-up call’ for American AI, the stock market sell-off was brutal.
The NASDAQ dropped more than 3% in a day, as a staggering one trillion Dollars in market value was wiped off the core tech-driven US index on a manic Monday.
Negative impacts hit the whole AI supply chain, its customers, clients and financiers.
Rise of the Magnificent Seven
The firm with furthest to fall was chipmaker Nvidia. A share-price plunge of 17% on the day lost it $600 billion in total, along with the crown of world’s most valuable company.
However, the sheer size of those numbers is key. First among equals by some distance, Nvidia was front-running the peloton of so-called ‘Magnificent Seven’ US tech stocks — with the others being Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Tesla.
Enjoying a speedy and stratospheric rise, Nvidia’s stock shot up more than 170% in 2024 alone. In a bull-market surge, the Mag 7 made a lot of money; but were they overvalued?
The explosive entrance of DeepSeek seemed to say so, yes. However, the bigger question for the wider world is whether the losses of the few will mean gains for the many?
Diversification and democratisation
The implications and impact of the rapid diversification of AI right across business and industry could enable democratisation of access to tech, both socially and geographically.
However, a price-drop in one aisle of the global growth superstore, can also carry unintended consequences for shoppers elsewhere. In other words, it is not all good news.
So, what has actually changed?
Well, if a week is a long time in politics, a fortnight is surely an eternity in Silicon Valley.
So, to discover what useful lessons might be learned from all this, including the prospects for widespread adoption of AI and realisation of a shared opportunity, check out the full-length article, free on The Hub:
AI — the difference between promise and profit.
To view a back-catalogue of articles authored by Jim McClelland for ‘The Hub’, please see archive here.
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