DeepSeek’s new AI model caused a shockwave in financial markets yesterday. Bitcoin fell below the $100,000 mark, while tech giant Nvidia plunged by 19%.
Meanwhile, Bitcoin is bouncing back, currently trading at $103,000. Is the Chinese storm already over?
With a 19% price drop, Nvidia lost nearly $600 billion in market capitalization yesterday.
DeepSeek AI Model Sparks Controversy
A new large language model (LLM) from China is reportedly capable of delivering performance on par with ChatGPT and the top AI models from Silicon Valley’s biggest tech companies, despite not relying on the latest and most advanced chips.
Additionally, this AI model was allegedly trained for less than $6 million, whereas major tech firms typically spend hundreds of millions on similar projects. This breakthrough triggered turmoil in the stock market yesterday, which also impacted Bitcoin.
DeepSeek claims that its AI model is 97% more efficient than its competitors and can even run on older Nvidia chips.
However, Elon Musk and Alexander Wang have publicly disputed these claims. They argue that it is “obvious” that DeepSeek has far more computing power than they are admitting.
As I speculated in below, this may/may not be true but is now part of the discussion.
My view is the big geopolitical cold war = 4D chess moves that are not fully apparent yet. Yuan weakness is not their weapon of choice. Financial, economic and technological warfare. https://t.co/eWLLBV2mPP pic.twitter.com/aQihY8z49o
— Danny Dayan (@DannyDayan5) January 27, 2025
This debate is far from over. If DeepSeek does indeed have significantly more Nvidia chips than they claim, it could actually be good news for the world’s largest chipmaker.
On the other hand, if DeepSeek is truly 97% more efficient, this could also be a net positive for Nvidia. While it might initially seem negative—as fewer Nvidia chips would be needed—it could also enable entirely new applications.
In other words, it could accelerate the adoption of artificial intelligence, ultimately benefiting Nvidia in the long run.
Bitcoin Price Recovers
Meanwhile, Bitcoin is rebounding from the shock caused by DeepSeek’s impact on financial markets.
It appears that the 50-day moving average, around $99,000, provided strong support for Bitcoin.
This is a strong signal, as Bitcoin is still trading above the $100,000 mark despite yesterday’s panic.
However, a weaker phase for Bitcoin could be ahead. Despite positive news from the Trump administration, Bitcoin has struggled to convincingly reach new all-time highs.
Additionally, U.S. bond yields are currently high, which could slow economic growth in Q1 2025.
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