Nvidia (NASDAQ: NVDA) stock took a haircut recently after China-based startup DeepSeek announced the success of its R1 model at building open-source large language models for a fraction of the currently expected cost.

Nvidia is touting the performance of DeepSeek’s open source AI models on its just-launched RTX 50-series GPUs, claiming that they can “run the DeepSeek family of distilled models faster than anything on the PC market.” But this announcement from Nvidia might be somewhat missing the point.

DeepSeek stunned the tech world with the release of its R1 "reasoning" model, matching or exceeding OpenAI's reasoning model for a fraction of the cost.

Perhaps no stock was more profoundly affected by the news from DeepSeek than Nvidia (NVDA -3.67%). In a sense, DeepSeek validated its dominance by announcing its H800 accelerators

DeepSeek, the new player on the scene, is a Chinese company that has been making huge waves in AI development. Its powerful technology could change things such as healthcare, finance – and even the way we interact with the internet. Investors are excited because they see DeepSeek as a potential leader in shaping the next generation of AI tools.

DeepSeek has launched an AI model that was reportedly developed with significantly less computational power than traditional methods. Shares of Nvidia are under pressure amid concerns that DeepSeek's methods may undermine demand for its high-performance GPUs.

Nvidia's H800 was launched in March 2023 and is a cut-down version of the H100 It is also significantly slower than Nvidia's H200 and AMD's Instinct range These artificial constraints have forced DeepSeek's engineering to innovate It was widely assumed that the United States would remain unchallenged as the global AI superpower,

In a surprising twist, Deepseek's cost-effective AI solution has rattled the stock market, raising eyebrows and sparking intense scrutiny from U.S. officials.