The AI industry is set to lose more than $1 trillion — yes, that's with a "t" — after an open-source Chinese AI company called DeepSeek's ChatGPT competitor skyrocketed in popularity over the weekend, sparking fears that the massive hype surrounding the tech was unwarranted.

It's been a bloodbath for Silicon Valley, with AI chipmaker Nvidia wiping out over half a trillion in market value alone, possibly the biggest one-day market loss for a single company in history.

Axios called DeepSeek's rise a potential "extinction-level event for venture capital firms that went all-in on foundational model companies."

It's also a spectacular black eye for newly-minted president Donald Trump, who hugely leaned into the AI industry — and specifically the enormous datacenter investments that are now in freefall — during the first week of his second term.

One of the first things Trump did was to proudly announce a massive $500 billion AI infrastructure project, dubbed Stargate, involving the likes of OpenAI, Japanese investment group SoftBank, and the software giant Oracle. The idea is to have the companies commit $100 billion combined — with the goal of raising a total of $500 billion over the next four years — to build unfathomably powerful new datacenters to power their buzzy industry.

But considering Nvidia has now wiped out more than even that in a matter of hours today, the bet's currently looking shaky. Investors have long balked at the sheer amount of money AI companies say they need to train these AI models, especially given the lack of any real short-term plans for recouping those costs.

Now that DeepSeek, a startup reportedly born out of a Chinese hedge fund in 2023, has claimed its AI models can rival OpenAI's best at a tiny fraction of the cost, Wall Street has seemingly seen enough — and started unloading the gravy train.

The optics for Trump are humiliating.

"It’s big money and high-quality people," Trump said during last week's Stargate announcement, calling it a "resounding declaration of confidence in America’s potential."

OpenAI CEO Sam Altman has yet to chime in on the matter. The latter sparred with multi-hyphenate billionaire Elon Musk last week over the former's involvement in Stargate.

Musk took to his social media platform to blast the Trump-led initiative, accusing OpenAI of not having the funds to invest in Stargate. Altman promptly denied those claims.

DeepSeek has turned the hype surrounding the tech upside down, triggering widespread concerns that the AI industry may be massively overspending. Awkwardly, the companies behind Stargate have already broken ground, with the first enormous data center, the size of New York City's Central Park, already under construction near Abilene, Texas.

Given the timing of DeepSeek's surge to fame, it's certainly not a good look for Trump as we head into the second week of his presidency. In short, the only thing we know for sure is that the next four years are bound to be as chaotic as ever.

More on DeepSeek: Silicon Valley in Shambles as Chinese Startup Creates Top-Tier AI Without Billions of Investment


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