It’s not often that I write about short-term market developments but the whole world of Artificial Intelligence (AI) is changing so quickly that I felt it was appropriate, and timely, to write about a potential major development in AI this past week.

Many of you have likely heard of ChatGPT or are bombarded with ads for Google Gemini or Microsoft Copilot on your devices. The race to achieve Artificial General Intelligence or AGI has gone to warp-speed faster than Patrick Stewart can commend his crew to “Engage”.

With a heated and competitive race such as this, OODLES (the technical term) of money has been thrown into development. President Trump announced just last week plans to invest $500 billion to make America the world’s leader in AI technology. To say that the market was expecting a lot of money to flow into the entire AI system is an understatement.

Then along came a small Chinese startup with an AI model called DeepSeek that hit the tech Philistines squarely in the forehead. DeepSeek’s r1, a rival AI model to ChatGPT o1, was released last week and its performance metrics were comparable to anything ChatGPT could do.

This, alone, isn’t the big news because every couple of weeks we see an upgraded Artificial Intelligence program that is leaps better than a competitor and we know China has been working just as hard to build great AI tech and to reach AGI before the rest of the world. It’s akin to the Manhattan Project or the Apollo missions, isn’t it?

The BIG news from DeepSeek was that they announced it cost only $6 million dollars to build and reach this level of AI competence. I’ll cast my doubts that this was the all-in cost needed to build and train an AI model but we won’t let facts get in the way of a good story.

If DeepSeek COULD build something equal to ChatGPT on much lower budget, what does that mean for all the Billions of dollars currently planned to be spent to build newer and better models? Wait a second, does this mean I don’t need eleventy billion Nvidia Graphic Processors to do all of this? These are the questions that have hit the market today and the answers, so far, are a resounding NO.

Nvidia, the Belle of the Ball for 2 years? Down 17% on this news.

Taiwan Semiconductor and Broadcom, massive semiconductor manufacturers in their own right? Down 14% and 17% of this news.

The market is clearly now thinking about what a world looks like where spending is in the tens of billions instead of hundreds of billions on the tools to make Artificial Intelligence happen. I have my doubts about DeepSeek’s reported $6 million budget, but it HAS put a dent in the idea that “we” need OODLES of new money to build AI (Note- this is the royal “we” as in Silicon Valley tech executives)

We are very clearly heading in a direction of increasing competition in Artificial Intelligence from around the world and China will be right at the top of the leaderboard. What comes of it is mostly unknown, but this development has changed the game and it’s something we will keep an eye on.