DeepSeek’s AI Model Shifts Focus, Raises Alarm for Nvidia Investors

SHANGHAI, China — Investors in Nvidia faced a jolt late last month when Chinese artificial intelligence start-up DeepSeek revealed an updated foundational model. The announcement, made in August, led to a significant drop in Nvidia shares as market observers processed the implications of the two-year-old firm’s advancements that challenge existing global benchmarks.

DeepSeek’s decision signals a shift towards supporting domestically produced chips, a move that could reshape the competitive landscape. The concern escalated as DeepSeek was not alone in this quest to bolster China’s AI capabilities without depending on U.S. technology.

Last week, Huawei Technologies, a leading player in China’s push for tech self-sufficiency, showcased its latest offerings from the Ascend chip series. Huawei introduced hardware designed to deliver high-performance computing power without relying on Nvidia’s processors. This revelation marks the first time Huawei has shared its chip roadmap since being blacklisted by the U.S. in 2019 due to national security issues.

Beijing has been advocating for its tech giants to stop purchasing chips customized by Nvidia, which were developed under U.S. export restrictions. The combined efforts of Huawei and DeepSeek illustrate how U.S. trade limitations have inadvertently sparked innovation in China’s domestic AI sector, enabling Beijing to gain a competitive edge in its ongoing tech rivalry with Washington.

Gary Ng, director and senior economist for Asia Pacific at Natixis Corporate and Investment Bank, noted, “DeepSeek will look for alternatives for chips. As the national champion, Huawei will play a major part.” This strategic pivot highlights the growing confidence in home-grown technology and the evolving landscape of the AI industry in China.