The market collapsed following the launch of the R1 version of DeepSeek, an artificial intelligence developed by a Chinese company. What happened?
Over the past few hours, the markets—particularly the NASDAQ (the index of major technology stocks) and the cryptocurrency index—have fallen sharply. Many analysts believe this reaction is due to the launch of the R1 version of DeepSeek, an artificial intelligence system based on language models similar to Chat GPT.
In particular, the speed with which DeepSeek was developed and its extremely low cost caused a stir, especially considering that the model is free and open-source. According to its developers’ statements, the realisation of DeepSeek R1 required only USD 6 million and two months of work.
DeepSeek: a threat to the United States?
What is the leading cause for concern related to this innovation in artificial intelligence, which has contributed to the recent collapse of technology stocks? It is quickly said: DeepSeek seems to work very well, and the costs to develop it are negligible compared to those incurred, for instance, by Google to ‘train’ Gemini ($191 million) or by OpenAI to release Chat GPT 5 (between $1.7 and $2.5 billion). This disparity doubts the robustness of AI-related stocks’ impressive growth.
The most commonly discussed hypothesis—though it should be cautiously approached is that DeepSeek could revolutionize the artificial intelligence market and significantly reduce the demand for specific hardware components. This could potentially lead to a wave of panic selling. Conversely, some argue that this is merely a narrative, a typical ‘catalyst’ used to explain movements that are actually part of normal market fluctuations.
What about the crypto market?
Cryptocurrencies experienced a decline for two primary reasons. First, there is a notable correlation between the stock market and the crypto market: when one market falls, it often pulls the other down as well. Additionally, some analysts believe that macroeconomic factors are at play. For instance, during the Federal Open Market Committee (FOMC) meeting on January 29, interest rates could remain unchanged or even be increased despite the new president, Donald Trump, advocating for a reduction.
The market and price movements
The Nasdaq index experienced a correction of nearly 4% before the market opened, while NVIDIA stock plummeted over 14% in pre-market trading before recovering slightly at the start of the trading session.
In terms of cryptocurrencies, Bitcoin fell below the significant psychological threshold of $100,000, a level considered crucial support by some analysts, but then recovered. Overall ,sentiment regarding the leading cryptocurrency appears steady. Prominent analysts, including Arthur Hayes, continue to predict a price target for Bitcoin between $180,000 and $250,000 during this bull market. Additionally, it’s worth noting that February has historically been a strong month for cryptocurrencies, with Bitcoin typically averaging a performance increase of around 15%.
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DeepSeek is not a ‘black swan’
Despite the scaremongering and scapegoating regarding the recent drop in prices, many experts believe that DeepSeek should not be considered a ‘black swan.‘ By definition, a black swan refers to unpredictable and disruptive events—such as wars, pandemics, or the unexpected collapse of key sectors or players—that can radically alter markets for a prolonged period. For example, the black swans of the last cycle were the collapse of the Earth-Moon ecosystem and the failure of the centralized exchange FTX.
In the case of DeepSeek, however, we are dealing with an innovation that, while interesting, is likely already reflected in market prices. This is especially true at a time when artificial intelligence is at the forefront of media and financial discussions. When everyone is warning about a potential bubble, it suggests that the information is already widely known and, therefore, largely anticipated.
As several analysts note on social media, a narrative is often constructed to justify periods of panic or sudden sell-offs. Without concrete evidence of a widespread collapse, the current market correction may merely be a technical adjustment within an overall bullish trend. Focusing on fundamentals and long-term prospects is the most prudent strategy in a market known for its volatility, helping investors avoid being swayed by extreme assumptions or temporary ‘noise.’
