China’s DeepSeek Just Shook the AI World–And Elon Musk Isn’t Buying It

DeepSeek just flipped the AI game on its head. The Chinese startup dethroned OpenAI’s ChatGPT as the most-downloaded free app on Apple’s App Store, sending shockwaves through the market. Nvidia (NASDAQ:NVDA) plunged 16%, ASML (NASDAQ:ASML) dropped 7% in the morning, and tech investors hit the panic button. DeepSeek’s R1 model, an open-source reasoning engine, is making wavesnot just for its performance, but for how cheaply it was built. The company claims it trained its latest model using just 2,000 Nvidia chipscompared to the 16,000 or more needed by competitors. Elon Musk isn’t buying it. When Salesforce (NYSE:CRM) CEO Marc Benioff called DeepSeek’s rise proof that AI isn’t about GPUs, Musk fired back with a simple, Lmao no.

The AI arms race just got real. DeepSeek’s rapid climb highlights the growing threat to U.S. dominance, forcing Big Tech to react fast. Meta (NASDAQ:META) has reportedly launched multiple internal war rooms to analyze the disruption, while Microsoft (NASDAQ:MSFT) is leaning into its AI investments to stay ahead. The bigger question? Whether the AI hype cycle is reaching its peak or if DeepSeek’s playbookcheaper, open-source AIsignals a new era. Some analysts worry this could be the beginning of an AI bubble, while others say it’s just the next step in the industry’s inevitable evolution toward commoditization.

Meanwhile, the U.S. isn’t sitting still. President Trump just announced a massive AI initiative, pouring up to $500 billion into domestic AI infrastructure with OpenAI, Nvidia, and Oracle (NYSE:ORCL) leading the charge. But if DeepSeek’s success proves anything, it’s that AI innovation isn’t just about who has the most moneyit’s about who can execute faster. With China closing the gap, investors are left to figure out: is this the start of a seismic shift, or just another chapter in the AI hype cycle?

This article first appeared on GuruFocus.

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