DeepSeek’s AI Breakthrough: Do we still need Nvidia as much in 2025?

Has Nvidia met its match in DeepSeek? Investors seem to think so given the Tech crash early this week.

After wanting exposure to AI, investors around the world have put a lot of their eggs in the Nvidia basket in the last 2 years and were not wrong in doing so – after all, GPU’s (the company’s specialty) work as the brain of AI-focused computers and can help AI data centers operate things like Chat-GPT. However, the emergence of DeepSeek has led to doubts that Nvidia will have the AI boom all to itself.

Don’t take our word for it – Monday January 27, 2025 saw the biggest wipe out of shareholder value in stockholder history: US$465bn off the market cap of Nvidia (albeit only a 13.6% decline of its total value). Nvidia was not the only stock to suffer a slide – European companies ASML, Siemens and Schneider Electric fell too, all by over 8% with Siemens falling nearly 20%. In Japan, chip suppliers to Nvidia fell too, most pertinently Advantest.

 

So, who is DeepSeek?

DeepSeek is essentially a Chinese chatbot competitor to ChatGPT. Now, it is not the only rival, but it claims to have used fewer and less advanced chips than its rivals to develop its models, making DeepSeek’s services cheaper to run – at least allegedly. The irony here is that DeepSeek has used Nvidia’s chips in the past to develop its models. The situation is more complicated now because Nvidia’s most advanced chips have been banned from export to China since 2022 and others have followed. Too late though.

The impact will not be isolated to Nvidia, in our view, because using cheaper and simpler AI chips for chat bots and other AI application may change the Tech landscape around the world.

What does that mean for investors? This article specifically delves into the technology behind DeepSeek, the competitive dynamics in the landscape built on semiconductor innovation and how all of these changes are affecting Tech stocks globally.

 

DeepSeek’s AI Technology is Leveling the Playing Field

DeepSeek’s AI model is an advanced AI with high computational power. But it isn’t only the technology itself: what is most appealing about DeepSeek is affordability. For ages, advanced AI tools have been afforded only to big-budgeted organisations. This is most evident in places like Asia and Europe, where steep costs have long hampered the countries’ growth curve in terms of AI adoption. In these markets, DeepSeek’s solutions are a welcome alternative to the overpriced offerings of other players. The company claims its R1 chip cost US$5.6m to develop, whilst the current cost of training models can be up to $1bn.

Now, you have to take this claim with a grain of salt, but if this is even remotely true, AI solutions powered by this technology will be far more lucrative. Arguably the biggest impact will be because it will be cheaper for customers (i.e. companies paying for AI tools, which they generally do via a system of tokens which put a price on the size and volume of queries and the ‘return’ they get). IBRS has estimated R1 costs US$0.14-0.55 per 1 million tokens, but OpenAI costs US$1.25 per 1 million tokens.

To try and illustrate the radical disruptive potential, PwC estimates that the global AI market will contribute £11 trillion to the world economy by 2030, a growth that will occur mostly in sectors like healthcare, logistics, and manufacturing, where cost-friendly AI solutions are already taking root.

We believe that the company’s multi-pronged approach to tackling market demands makes it a catalyst for the wider adoption of AI. It’s not about technology per se, it’s also about leveling the playing field and allowing poorer nations, and smaller companies, to compete with the big guns.

 

DeepSeek is Reshaping the Competitive Landscape

DeepSeek’s rise pits it against some of the biggest names in AI, such as OpenAI, Google DeepMind and Microsoft. These players have enjoyed dominance in the sector for quite some time, but their relatively less expensive and reasonably scalable competitor is now forcing them to rethink their strategies.

A good example is OpenAI’s premium subscription model, where tools, such as ChatGPT, have faced criticism for being beyond the reach of small enterprises. There is no denying that OpenAI makes some great technological advances;. Unfortunately, its cost structure is often a barrier for companies working on a more frugal budget. DeepSeek has situated itself as a market-friendly alternative: delivering similar performance at small-business pricing.

This is significant. It is no longer about technology living up to some supposed “intelligence” standard; it becomes more about bringing value to a much larger number of people. In our opinion, DeepSeek’s commercialisation approach is a manifestation of that transition in the AI landscape.

DeepSeek has a particularly notable influence in Europe and Asia, given the rapidity with which its technology is gaining adoption in these regions. Historically, these regions have been innovation hotbeds, but affordability has often become a hindrance to businesses seeking to integrate advanced AI solutions into their model.

For instance, in Germany, many mid-sized enterprises have deployed DeepSeek’s AI Assistant to improve internal operations for operational efficiency and customer engagement. In Asia-Pacific markets, such as South Korea and China, DeepSeek is partnering with local firms to reach the market.

According to Statista, the annual growth of the AI market in Asia is expected to exceed 25% by 2028, bolstered by the growing demand for AI-powered tools permeating every industry. We believe it has given DeepSeek a significant edge compared with its competitors fixated only on solutions tinged with premium prices.

 

Potentially Big Implications for Global Tech Stocks

The rise of DeepSeek is already making waves in the global Tech stock market. From Europe to Asia, those affiliated with this new technology are gaining in value, while traditional players are under investor scrutiny and are seeing their stocks under severe pressure.

 

Opportunities for Investors

For investors, DeepSeek brings an host of opportunities. Companies partnering with DeepSeek, or adopting its technology, will see a more streamlined cost base and increased competitive advantage. For example, late adopters in the manufacturing and logistics sectors have already seen productivity gains of 20% post-deployment of AI solutions from DeepSeek, which has helped enhance market confidence in those companies and their stock prices rising by double digits in some instances.

In our view, this elevates the importance of looking out for those companies that are gaining from DeepSeek’s technology, so that investors can appropriately position themselves to benefit from the much larger trend towards affordable AI adoption.

It also shows there might be opportunity in China. We use the word might deliberately because it is likely investors will have to choose between America and China. Donald Trump has promised to make AI a centerpiece of his second term and he has already announced US$500bn in funding towards AI investment project Stargate. He has also threatened to impose tariffs on China. This may be an issue DeepSeek will need to deal with being reliant on GPU’s, although China generally is ahead in deploying autonomous robotics for commercial industry. Plus, China’s control of the internet and society gives it an advantage in large language model development.

 

Risks and Challenges

Of course, things are everything but smooth at the moment for established AI players. Investors are still weighing the implications of DeepSeek’s success on the Tech market, but have already dumped a lot of them, including Nvidia. We expect more volatility will be ahead for established players, such as Microsoft and Google. None of them have suffered as much as Nvidia – at least not yet. But hat could still happen.

And also chip manufacturers and chip equipment suppliers, such as ASML, have seen their share prices take hits as investors fear that the world may need far fewer very advanced GPU’s from Nvidia and the likes going forward. This raises interesting questions for investors: Should they stay long on established Tech giants or plunge into some smaller firms that may quickly rise due to DeepSeek’s technology?

In our opinion, it depends on individual investment aims and the investor’s risk tolerance: well-established names may prove to be great long-term bets, but investors should surely not dismiss emerging DeepSeek-backed firms.

 

The Road Ahead is Uncertain

DeepSeek’s emergence thus becomes a crucial point in the AI sector. By giving organisations competitive, high-performing and low-cost delivery solutions, it is changing the way businesses think about AI adoption. This, in our view, could be a pivotal junction in the global Tech industry. While there’s a long way to go, the initial rise of DeepSeek indicates that it has a very good chance of bringing about a change that would be monumental and long-lasting. Investors, technologists and entrepreneurs alike know that understanding how this breakthrough may pan out is critical for charting an investment course ahead in this AI adventure.

 

What are the Best ASX Tech Stocks to invest in right now?

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FAQs

• What sets DeepSeek apart from other AI companies?

  According to our view, DeepSeek has managed to bring to the table high-performance AI capabilities in a distinct fashion, making it affordable and more scalable. The DeepSeek-V3 model performs exceptionally well without the costly prices usually incurred by its counterparts such as OpenAI.

• How has DeepSeek impacted tech stocks in Europe and Asia?

  DeepSeek’s solution has ensured market adoption in places like Germany, South Korea, and China while increasing the stock prices of partner firms. After adopting technology by DeepSeek, several companies in Asia noticed a rise in stock prices by 10 to 15%.

• What challenges does DeepSeek’s rise pose to competitors?

  This cost-effective approach offers long-term players the chance to innovate more and price competitively. This means opportunities and risks for those companies that have depended on a premium price combo to fund this kind of R&D.

• What should investors focus on in light of DeepSeek’s rise?

  We would suggest that investors remain attuned to companies that adopt or enter into partnerships with DeepSeek’s technologies, particularly in areas where affordability is a key element of AI adoption. Equally, having an eye on the significant market players.

• How sustainable is DeepSeek’s growth?

  With a background that speaks for itself, DeepSeek has demonstrated phenomenal growth. However, it would take continuous innovation and expansion around markets on a worldwide scale for it to maintain its position.