Crypto
Key Points
- Nvidia shares dropped by over 3% today, following the launch of new AI models.
- A new model from Chinese start-up DeepSeek could necessitate less investment in AI infrastructure.
Today, the crypto market recorded a sharp drop while Nasdaq futures slumped as well, especially Nvidia shares. Amidst the significant drop of Nvidia, the AI coins sector also experienced a drop of almost 13% today.
AI Coins Sector Dropped Significantly
Today, January 27, the AI coins sector dropped by 12.8%, having a market cap of over $36.3 billion, and a 24-hour trading volume of $3.4 billion.
Virtuals Protocol (VIRTUAL) dropped by over 20%, Near Protocol (NEAR) dropped by over 10%, and Artificial Superintelligence Alliance (FET) also dropped by over 15% today, according to data from CoinGecko.
The sharp drop in the AI coins sector market cap came amidst a decline in Nvidia share prices.
Nvidia, Down by Over 3%
Today, Nvidia is down by over 3% and the tech share is trading at $142.62 after reaching an ATH on November 8, 2024, when the share topped $147.
As Investing.com noted, today, tech-heavy Nasdaq futures dropped with Nvidia edging lower in premarket US trading amidst concerns that a new model from Chinese start-up DeepSeek could necessitate less investment in AI infrastructure.
Broader Wall Street futures fell sharply as well, after DeepSeek launched a set of new open-source models over the past week, that claim to match offerings from rivals including ChatGPT maker Open AI for only a fraction of the cost.
DeepSeek’s Newly Launched AI Models
DeepSeek, the AI research lab founded in 2023, focuses on developing AI models that emphasize cost efficiency and accessibility.
Its latest AI model DeepSeek-R1 was designed to match or exceed the performance of ChatGPT-4 while operating on a much smaller budget and with fewer hardware requirements.
What is DeepSeek-R1?
DeepSeek-R1 is the flagship AI model of the company created to compete with the industry leaders, offering the following benefits:
- High performance in critical tasks including reasoning, code generation, language understanding
- Lower resources for training and deployment
Key Features
Key features of DeepSeek-R1 include the following:
- Reinforcement Learning (RL) Training – The AI model employs RL training to develop reasoning capabilities, allowing it to enhance its understanding and decision-making via iterative learning processes.
- Cost-Efficiency Design – Achieving comparable performance to already established AI models, while requiring less computing power (training DeepSeek-R1 costs were $5 million, compared to at least $100 million for other AI models).
- Open-Source Availability – The AI firm open-sourced its main AI model and six smaller models as well, licensed under MIT license, allowing researchers and devs all over the world to modify, fine-tune, and commercialize them.
The Importance of Open-Source in AI
Open source has various benefits in the AI industry, including the following:
- Accessibility for researchers and developers to experiment with advanced AI tools
- High transparency and external verification regarding performance and efficiency
- Global collaboration, meaning that developers all over the world can build on DeepSeek’s models, leading to the creation of new apps and improvements
- Challenging industry norms, and disrupting traditional AI development model, a shift that could encourage other firms to adopt similar practices
Bernstein analysts noted that DeepSeek’s new AI models are impressive, especially in their ability to compete with similar products. The AI industry reportedly needed such innovations to continue its progress, as it could squeeze more performance out of the existing hardware, according to Investing.com‘s notes.
However, analysts argued that investors should not buy into the “doomsday scenarios” currently playing out on social media.
DeepSeek and Nvidia Impact
Nvidia has been the backbone of AI development with GPUs that are critical for training large-scale AI models.
This high demand drove Nvidia prices higher, but it’s important to highlight its vulnerability to shifts taking place in the AI landscape including the one involving DeepSeek’s products.
While these latest innovations are unlikely to undermine Nvidia’s products completely, they highlight a shift in the AI development paradigm regarding diversification, demand, and focus on accessibility.
