DeepSeek’s success and US stock performance

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DeepSeek's AI model, DeepSeek-R1, excels in reasoning and mathematical tasks, and its cost is only a fraction of that of Silicon Valley giants. In the GSM8K benchmark test, DeepSeek-R1 scored 67.2%, which is better than OpenAI's GPT-3.5 (50.8%) and close to GPT-4 (80.8%). This shows that DeepSeek has reduced its dependence on high-end chips through efficient model architecture and training algorithms.

Its success may make it difficult for U.S. stocks to rise even in the face of strong earnings reports, mainly for the following reasons:
  1. Investors are concerned about competition : DeepSeek's low-cost model could erode the market share and profitability of U.S. AI companies. For example, on January 27, 2025, the Nasdaq fell nearly 4%, even though many technology companies reported strong earnings, which analysts attributed to the competitive threat from DeepSeek.
  2. Challenges to Tech Dominance : DeepSeek's breakthrough could cause investors to reassess the future growth potential of U.S. AI companies, even if earnings reports show good performance. The Financial Times reported that investors' concerns about long-term competition curbed the rise of technology stocks.
  3. Geopolitical tensions : U.S.-China technological competition could heighten investor concerns about the impact of policy on U.S. AI companies, further depressing stock prices.
Specific company impact
  • Nvidia : As a major supplier of AI chips, Nvidia's stock price fluctuated after the DeepSeek news. Although DeepSeek uses its chips, its efficient utilization may reduce demand for high-end chips in the future, affecting Nvidia's growth expectations.
  • Microsoft : With close cooperation with OpenAI, investors may be worried about the competitive impact of DeepSeek's low-cost model on OpenAI. Although Microsoft's recent financial report was strong, its stock price did not rise as expected.
  • Alphabet and Meta : These companies are also investing in the AI ​​field, and DeepSeek’s success may lead to a reassessment of their AI strategies, curbing stock price gains.
Other market factors
Although DeepSeek is an important factor, the performance of U.S. stocks may also be affected by other factors, such as rising interest rates, slowing economic growth or global market fluctuations. CNBC reported that on March 15, 2025, the overall performance of U.S. stocks was driven by a variety of factors, but the downturn in the technology sector was closely related to DeepSeek's competition concerns.

Silicon Valley Response and Global Impact
An unexpected detail is that despite the hardware limitations, DeepSeek has attracted Silicon Valley companies such as Perplexity to use its model ( Perplexity's X post ), showing the expansion of its global influence. This may further exacerbate investors' concerns about future competition from US AI companies.

Discussion and Conclusion
Research shows that DeepSeek's success may make it difficult for US stocks to rise even in the face of strong earnings reports. The evidence tends to support its impact, but there is controversy involving other market factors. Investors' concerns about AI competition may be the main reason. An unexpected detail is that DeepSeek still attracts Silicon Valley companies to use its model, showing the expansion of its global influence.

limitation
Due to limited data after March 15, 2025, some analysis is based on trend speculation. The specific cause and effect relationship of market performance may be complex and requires further research.

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