David Edwards
Early Asian trading hours on Monday saw a sharp decline in the AI cryptocurrency market after DeepSeek, a Chinese artificial intelligence business, gained notoriety for its affordable AI models. Significant AI-focused tokens suffered price drops of 8% to 10%, including Near Protocol (NEAR), Internet Computer (ICP), Render (RENDER), and Filecoin (FIL). During Sunday’s overnight trading session, the Nasdaq 100 futures saw a steep decline of 330 points, coinciding with this sell-off.
Market-Wide Drop in Cryptocurrencies for AI
The market capitalization of AI cryptocurrencies has fallen by more than 7.66% in the last day, according to CoinMarketCap, pushing the total value below $44 billion. As Bitcoin tests its critical $100,000 support level, this sharp reversal is consistent with losses in the cryptocurrency market as a whole.
DeepSeek’s disruptive market entry is the main cause of the decline. DeepSeek has created AI models that are competitive with Silicon Valley giants at a fraction of the price by utilizing inexpensive AI chip infrastructure. While American AI firms spend hundreds of millions on training systems that rely heavily on GPUs, DeepSeek’s technology runs on much less expensive hardware.
Market insights and investor reactions
Industry analysts said the correction can be a “buy-the-dip” opportunity despite the decline. DeepSeek’s open-source, low-cost methodology has the potential to facilitate AI adoption on a never-before-seen scale, according to Daniele, a Decentralized Finance AI (DeFAI) expert. Daniele said in a statement:
“If you’re selling AI coins due to DeepSeek models being cheap and open source, they are actually very helpful to scale AI Apps to millions of users with low-entry barrier pricing. This is the best thing that could have happened to the industry.”
DeepSeek Contests American Dominance in AI
The emergence of DeepSeek has raised questions about Silicon Valley’s AI companies’ competitiveness. Because of the need for GPU-intensive data centers and the corresponding energy requirements, creating sophisticated AI models like GPT-4 or Claude frequently costs more than $100 million. DeepSeek, on the other hand, asserts that it can attain similar outcomes with an infrastructure that only costs $6 million.
Arthur Hayes, the former CEO of BitMEX, emphasized the wider ramifications and questioned the seeming superiority of American bonds and technology:
“A thot: what if the rise of DeepSeek causes global investors to question US exceptionalism. What if they question y they are over weight US tech vs the world and why they are over weight US bonds vs the world?”
Impact of Ripples on U.S. Chip Stocks
The disruptive strategy of DeepSeek has shocked American semiconductor makers. On Monday, major semiconductor companies such as Qualcomm (QCOM), Nvidia (NVDA), Arm (ARM), and Broadcom (AVGO) fell between 2% and 7% after news of DeepSeek’s rise and its app dominating the Apple Store download charts. The sell-off in tokens with an AI focus was exacerbated by this response.
Some observers think DeepSeek’s rise could promote long-term growth in the AI ecosystem by facilitating widespread adoption and reducing entry barriers for both developers and users, even though the short-term market picture is still uncertain.
