China's Hangzhou-based DeepSeek is laying waste to US AI stocks as investors question whether it is necessary to keep spending billions on new-age chips and power supplies for AI development, given that DeepSeek's R1 AI model was built for a relatively meagre cost of £4.49 million.
Most of the "magnificent seven" stocks declined markedly on 27th January, wiping out £86.7 billion from the fortunes of the world's 500 richest people. Industry experts are increasingly speculating if DeepSeek's AI model could lead to a major price correction for established AI giants, which have remained overvalued since ChatGPT's launch in 2022. These companies also drove 2024's year-long market rally, which buoyed the S&P 500 to record levels recently.
