Since DeepSeek, a new Chinese AI protocol, was publicly launched last Friday, crypto mining stocks have experienced a notable slump.
Essentially, DeepSeek was created as a hedge fund’s side project, with dramatically reduced access to hardware. Its success, regardless, has pierced the logic of pre-existing AI research.
DeepSeek Trashes Nvidia Stock
DeepSeek, the new AI protocol from a Chinese hedge fund, is wreaking absolute havoc on Nvidia and other leading mining stocks. Nvidia hit record-high revenues last November and predicted earlier this month that AI agents would become a multi-trillion-dollar industry.
Nonetheless, Deepseek’s arrival has caused a dramatic crash in the broader AI market.
The Deepseek arrival didn’t just hurt Nvidia; it also caused major declines in mining stocks like Marathon and RIOT. These businesses require heavy use of Nvidia hardware.
Both firms had been performing well prior to this, buying huge quantities of Bitcoin in the last month. Cipher Mining, another publicly listed Bitcoin mining data center, saw its stock plummet by 25% today.
However, according to tech journalist Ed Zitron, the massive valuation of AI-driven companies was artificially inflated:
“The AI bubble was inflated based on the idea that we need bigger models that both are trained and run on bigger and even larger GPUs. A company came along that has undermined the narrative – ways both substantive and questionable – and now the market panicked that $200 billion got wasted on AI capital expenditures,” Zitron claimed.
He clarified that DeepSeek’s stellar performance as an AI is not the factor that’s damaging Nvidia or these other firms. Instead, the larger concern is that DeepSeek is a side project run by a hedge fund, which achieved these results using dramatically lower capital investments.
The project’s success suggests that the US approach to AI research is flawed.
AI Investors Are Rethinking Their Approach
Last week, President Trump announced a new joint AI research initiative that would reach up to $500 billion in funding over the next four years. This would involve massive investments in data centers and power plants to brute-force the question of AI research.
DeepSeek built its model with limited access to Nvidia chips, but it still excelled.
If all that is true, then why would the market reward the resource-intensive approach favored by OpenAI and other major AI developers? Is that investment even necessary? Most investors are currently asking these questions.
Overall, this Chinese newcomer has cut right to the heart of the entire US AI development sector. DeepSeek may have proved that processing power isn’t the key to AI research, severely undercutting Nvidia.
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