Nvidia, the poster boy of AI industry, faced its moment of truth after a small Chinese company DeepSeek showed that it could do more with less of what Nvidia makes. The company, which soared to the top of the stock market by selling the computer chips fueling the world’s artificial intelligence boom, has been dealt a tough reality check by DeepSeek.On Monday, January 27, shares of Nvidia plunged more than 17% after DeepSeek showed that it could train a cutting-edge AI system with a fraction of the Nvidia chips that had been used in the past by OpenAI, the maker of ChatGPT. The company lost roughly $600 billion in market value, on what was its worst trading day since the pandemic sell-off in March 2020.
However, despite the market rout, Nvidia seems impressed with DeepSeek’s R1 model. Nvidia called DeepSeek’s R1 model “an excellent AI advancement”. “DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling,” an Nvidia spokesperson stated to CNBC. “DeepSeek’s work demonstrates how new models can be created using this technique, utilizing readily available models and computing power that fully complies with export controls.”
Notably, R1’s reported training cost was under $6 million, a fraction of the billions invested by Silicon Valley companies in developing their AI models. Nvidia’s statement are said to suggest that it views DeepSeek’s breakthrough as a potential catalyst for increased demand for its graphics processing units (GPUs).
“Inference requires substantial numbers of NVIDIA GPUs and high-performance networking,” the spokesperson added. “We now have three scaling laws: pre-training, post-training, and the newly identified test-time scaling.”
Nvidia also clarified that the GPUs employed by DeepSeek fully adhere to export regulations. This statement contradicts Scale AI CEO Alexandr Wang’s assertions on CNBC last week that DeepSeek likely utilized Nvidia GPU models restricted in mainland China. DeepSeek maintains that it utilized specialized versions of Nvidia’s GPUs designed for the Chinese market.
