DeepSeek shakes US markets; Vivek Ramaswamy calls it a 'Sputnik moment' to wake up

Vivek Ramaswamy, the Indian-American entrepreneur who ran for the 2024 Republican presidential nomination, called the crash in US markets after a launch of Chinese AI model DeepSeek a 'Sputnik moment'. The market slump on Monday hit Big Tech stocks the hardest, with Nvidia suffering a 17% decline and dragging the Nasdaq composite down by 5%.

"Sputnik-like moments are a good thing," Ramaswamy wrote on X. "We don't need to freak out, we just need to wake up."

The launch of Sputnik in the 1950s highlighted the potential implications of rocket technology capable of deploying satellites, unknown applications of such technology, and the perception that the launch had opened a new frontier – one the United States had not yet reached at the time.

During the early Cold War years, the Soviet Union was often seen as technologically inferior to the United States. However, the launch of Sputnik 1 in October 1957 challenged that notion. The Soviet successes with Sputnik 1 and Sputnik 2 sparked a sense of urgency in the United States.

Fears after China's DeepSeek launch

Concerns that the AI gold rush might be at risk sent shockwaves through Wall Street on Monday, following the emergence of a ChatGPT-like model from China. This development sparked predictions of challenges for Silicon Valley and accusations of unfair practices.

DeepSeek, which overtook rival ChatGPT to become the top-rated free application on Apple's App Store in the US, says it uses lower-cost chips and fewer data, challenging a bet in markets that AI will drive demand along a supply chain from chipmakers to data centres.

What shook the industry was DeepSeek's assertion that its new model, R1, was developed at a fraction of the cost currently spent by leading companies on AI, particularly on Nvidia's expensive chips and software.

Reactions of tech giants

Elon Musk, who has made significant investments in Nvidia chips for his xAI company's supercluster, has raised suspicions that DeepSeek may have secretly gained access to the banned H100 chips – a claim also echoed by ScaleAI's CEO.

Microsoft CEO Satya Nadella, clearly concerned, addressed the issue on social media just hours before the market opened, downplaying worries about low-cost AI and emphasising that affordable AI benefits everyone.