Nvidia defends role in Chinese AI advancements after DeepSeek's breakthroughs

Nvidia Corp (NASDAQ:NVDA, ETR:NVD) said on Monday that the success of Chinese AI firm DeepSeek is evidence of its chips' utility in the Chinese market.

The company was forced to address investor concerns over reports that DeepSeek had achieved major advancements with minimal Nvidia hardware.

The announcement follows a 17% drop in Nvidia's shares, spurred by fears that the company’s dominance in AI hardware could be challenged by more efficient alternatives.

"DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling," Nvidia stated.

"DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant.”

DeepSeek's progress has been met with both admiration and apprehension. Its V3 model reportedly achieves performance comparable to OpenAI’s GPT-4 while using just 5% of the GPU compute, and its R-1 model operates at 1/13th of the cost of GPT-4. These milestones, Nvidia noted, underscore the ingenuity spurred by resource constraints.

Nvidia stressed that the firm's breakthroughs still rely on its hardware.

“Inference requires significant numbers of Nvidia GPUs and high-performance networking,” the company said.

“We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling.”

DeepSeek’s advancements demonstrate how necessity is driving invention, according to Rahul Bhushan, Managing Director of ARK Invest Europe.

"DeepSeek’s V3 model…underscore an important truth: AI’s future is not just about throwing more GPUs at the problem,” Bhushan said.

“(T)he fact that DeepSeek’s innovations are open source cannot be overstated. This move opens the door to widespread adoption and decentralization, a trend that could democratize AI access and accelerate progress far beyond traditional players in the West.

“It also hints at China’s growing strategic ingenuity in shaping the AI landscape under constrained circumstances,” Bhushan added.

“We strongly urge investors to re-evaluate their AI funds and positions.”