It doesn't take an expert in computing or artificial intelligence to see that America's tech companies, energy companies, and the people who invest in them are close to panicking over the surprise drop of a Chinese AI that seems to rival and looks to exceed the performance of other AIs on the market. 

The markets are spooked so much that a trillion or so in market value evaporated due to the release of one bit of software. 

Why?

A Chinese artificial intelligence company called DeepSeek is grabbing America's attention — and sending a shock wave through Wall Street — due to its new tech, which some experts say rivals that of OpenAI's ChatGPT. 

DeepSeek is also catching investors off guard because of the low development costs for its AI app, which Wedbush Securities analyst Dan Ives pegged at only $6 million. By comparison, OpenAI, Google and other major U.S. companies are on track to invest a total of roughly $1 trillion in AI over the coming years, according to Goldman Sachs.

On Monday, DeepSeek's rollout roiled shares of AI stalwarts such as Nvidia, the high-flying manufacturer of advanced chips engineered for AI development, and Dutch company ASML, another chipmaker. The Chinese company's tech is raising questions about whether demand for Nvidia's chips could take a hit, as well as whether investors are overvaluing tech stocks that have been buoyed by the promise of AI, from Meta to Microsoft, experts said.

"DeepSeek has taken the market by storm by doing more with less," said Giuseppe Sette, president at AI market research firm Reflexivity, in an email. "This shows that with AI the surprises will keep on coming in the next few years."

DeepSeek's latest app comes just days after Mr. Trump announced a new $500 billion venture with ChatGPT maker OpenAI, Softbank and Oracle, dubbed Stargate, which he touted as ensuring "the future of technology" in the U.S.

You might think that Wall Street is spooked that a Chinese company can go head-to-head with the most sophisticated AI models in the world, but surprisingly enough, that is not really the case. One more competitor in a market that is likely to get crowded is worrisome, but shouldn't cause what amounts to a crash in not just the tech industry markets, but in industries throughout the US. 

DeepSeek’s upending of Wall Street is sinking shares of natural-gas producers, pipeline operators, miners and electricity generators https://t.co/zTyI9JQRws

— The Wall Street Journal (@WSJ) January 28, 2025

What makes DeepSeek so troubling to investors and tech companies is that it is not just good, even in this very early version, but that it is EFFICIENT in a way that American AIs are not. 

If you look hard, you can almost make out when the DeepSeek stuff hit pic.twitter.com/bjTQIyr8xZ

— Eddy Elfenbein (@EddyElfenbein) January 27, 2025

If you have followed the development of AI over the past few years, you may have noticed that one of the biggest constraints for the expansion of AI is the need for huge, power-hungry data centers. Some estimates predict that the electricity to power the coming AI revolution will exceed all the power used in American homes. 

DeepSeek, on the other hand, is efficient enough to run on older chips and consume much less energy. 

The emergence of Chinese AI upstart DeepSeek has Wall Street reconsidering one of the hottest trades of the past year: providing the energy to power the artificial-intelligence boom. 

DeepSeek’s claims that it has trained a sophisticated AI model far more efficiently than competitors called into question assumptions about the energy needed to power the new technology. Traders dumped shares of natural-gas producers, pipeline operators, power-plant owners, miners of coal and uranium, and even big land owners in the West Texas desert.

The selloff even extended to natural-gas markets, cutting the price of the heating and power-generation fuel to be delivered as far out into the future as 2028.

The rout shows how tendrils of the AI trade have spread beyond chip makers and big technology companies to sectors that usually have little to do with fast-growing tech stocks, such as oil-and-gas and utilities. 

The massive data centers that supply the computing behind AI are notorious electricity hogs, with power requirements that rival those of the largest American cities.

Of course, assuming AI will turn out to be as revolutionary as is claimed, consumers and businesses outside these specific ones will benefit greatly from a more efficient AI. Soaring power demand, higher natural gas prices, and electricity shortages are hardly things to be desired, even if hedge funds would love to profit off the AI boom. 

🚨TRUMP: “The release of DeepSeek AI from a Chinese company should be a wake up call for our industries that we should be laser focused on competing to win. We have the best scientists in the world. This is very unusual. We always have the ideas. We’re always first.” pic.twitter.com/fFiRjxMTmZ

— Autism Capital 🧩 (@AutismCapital) January 28, 2025

The bigger threat I see from DeepSeek is that if it really is more attractive than the current models, the Chinese will get yet another way into the information sphere and control it. If you think our Big Tech companies use their AIs to promote propaganda, you ain't seen anything yet. China's censorship on the platform is everywhere, and the way that it is programmed, it can manipulate all your data at its whim. 

DeepSeek answered my question about The Four Pests Campaign (Mao's Great Leap Forward) and then deleted it and pretended it had no idea what I was talking about. pic.twitter.com/9oB6qtBqI9

— Shahar Azoulay (@SAZOULAY85) January 28, 2025

DeepSeek isn't going to kill American tech companies, which have unlimited resources. DeepSeek claims they produced their model for about $6 million, which is the coffee budget for Google or Microsoft. 

I'm more worried about China getting even more control over the flow of information outside its borders. If they can provide a competent information tool at a lower price--even if the Chinese government is secretly subsidizing the effort and it is much less efficient than claimed--that could have a major impact on the political world. China will vacuum up every keystroke, every query, password, and God knows what and spew out whatever the Chinese Communist Party wants you to hear. 

It makes TikTok look totally benign.