DeepSeek Slashes Prices, Declares War on Nvidia and AMD’s AI Chip Dominance

Silicon Valley's hardware titans just got a brutal wake-up call.

DeepSeek's aggressive pricing move torpedoes Nvidia and AMD's margin structures—offering comparable AI performance at fractions of the cost. No more paying the 'GPU tax' just to train large models.

The discount offensive targets enterprise clients directly, bypassing traditional distribution channels. Early adopters report 40-60% savings on inference workloads without performance degradation.

Market analysts predict margin compression across the semiconductor sector—though let's be real, Wall Street will probably spin this as 'healthy competition' while quietly downgrading chip stocks.

When hardware becomes commoditized, the real value shifts to software and ecosystems. DeepSeek isn't just selling chips—it's selling escape routes from vendor lock-in.

Another reminder that in tech, moats get crossed faster than hedge fund managers change their thesis.

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Lower Cost

According to a rare update from the company in a peer-reviewed article in the academic journal Nature, DeepSeek revealed that the R1 model which shook the American titans when it was launched earlier this year cost just $294,000 to train.

According to those analysts in the know, this is ‘significantly lower’ than what its U.S. counterparts are spending on development.

DeepSeek’s release of what it said were lower-cost AI systems in January prompted global investors to dump tech stocks as they worried the new models could threaten the dominance of AI leaders including Nvidia (NVDA) and Advanced Micro Devices (AMD).

The U.S. AI stocks were further battered by the threat of President Trump’s tariff strategy, but have gradually recovered since April as can be seen below:

The Nature article said DeepSeek’s reasoning-focused R1 model used 512 Nvidia H800 chips.

AI Race

Some of DeepSeek’s statements about its development costs and the technology it used have, however, been questioned by U.S. companies and officials.

The H800 chips it mentioned were designed by Nvidia for the Chinese market after the U.S. in October 2022 made it illegal for the company to export its more powerful H100 and A100 AI chips to China.

U.S. officials told Reuters in June that DeepSeek has access to “large volumes” of H100 chips that were procured after U.S. export controls were implemented. Nvidia told Reuters at the time that DeepSeek has used lawfully acquired H800 chips, not H100s.

In a supplementary information document accompanying the Nature article, the company acknowledged for the first time it does own A100 chips and said it had used them in preparatory stages of development.

What is very clear is the challenge facing Nvidia and other U.S. firms as China accelerates its AI offerings. The increased Chinese government support for its domestic tech companies and regulatory crackdowns on its U.S. rivals is likely to keep the heat on.

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