Hedge fund giant Bridgewater Associates has warned that the rise of Chinese AI startup DeepSeek could trigger a short-term correction in tech stock prices, particularly among companies heavily invested in artificial intelligence, according to a report by Reuters.
However, the firm remains bullish on the long-term impact of DeepSeek’s advancements.
The firm’s recent launch of a free open-source AI assistant, which the company claims is more efficient and cost-effective than existing models, has shaken the market. The application has quickly climbed to the top spot on Apple’s US App Store, surpassing OpenAI’s ChatGPT, and raising questions about the multi-billion-dollar AI investments made by major US tech firms.
The launch contributed to a 17% drop in Nvidia’s stock on Monday, erasing $593bn in market value – the largest single-day loss for any company in history. Nvidia shares saw a slight rebound of 5% in premarket trading on Tuesday, but market concerns remain.
In a note authored by Co-Chief Investment Officer Greg Jensen and Jas Sekhon, Chief Scientist at AIA Labs, Bridgewater emphasised that DeepSeek’s innovation is significant but not necessarily negative for the broader AI ecosystem.
“DeepSeek’s success may push companies to optimise AI efficiency, particularly in how software interacts with hardware,” the note stated, adding that Nvidia could face more pressure in the short term as companies look for ways to maximise AI performance without solely relying on expensive hardware.
