The author(s) owns BTC and options positions in ETH (disclaimer).
1. Introduction:
DeepSeek-V3’s January 27 release triggered massive market losses—over $1T in equities and $240B in crypto.
The Web3 AI sector was hit hardest, losing $5.7B, or 26.9% of its value.
DeepSeek’s training efficiency breakthrough is reshaping AI’s power dynamics and casting doubt on future GPU demand.
Key Report Insights:
Market Reactions: DeepSeek-V3’s release caused a $1T equity loss, with tech stocks like NVDA falling up to 17.3%.
Crypto shed $240B, and AI tokens dropped over 40%.
Training Efficiency: DeepSeek’s V3 cost just $5.6M to train, far less than competitors like OpenAI.
Impact On Compute: DeepSeek’s efficiency reduces training costs, but high inference demand maintains compute needs.
Geopolitical Impact: Proposed 100% chip tariffs could disrupt supply chains, forcing manufacturing shifts.
Competition Surge: OpenAI’s o3-mini rivals DeepSeek’s R1, driving competition and agent adoption as inference costs drop.
Source: DeepSeek
2. Market Reactions:
DeepSeek-V3’s January 27 release sent shockwaves through equity and crypto markets, sparking sharp reactions across both sectors.
Source: TradingView
A. Equity Markets:
(i) Market Response:
TSM plunged 15.3%, NVDA 17.3%, and ARM 11.9%, while the NASDAQ-100 dropped 3.5% in Monday’s flash crash, erasing $1T in market value.
Hyperscalers like GOOGL, AMZN, MSFT, and META saw milder losses, relying more on AI deployment than compute for training.
Despite the sharp sell-off, this appears to be typical market volatility rather than a structural shift—at least for now.
Source: TradingView
(ii) Why It Happened?
DeepSeek-V3’s announcement of more efficient training methods slashed market expectations for future GPU demand, triggering the sell-off.
This hit NVDA and TSM hard, as their growth relies heavily on AI-driven revenue.
Adding to the pressure, proposed 100% chip tariffs from the Trump administration fueled uncertainty, threatening US tech margins and deepening the sector’s decline.
Source: Innovation Technology & Innovation Foundation
B. Crypto Markets:
(i) DeepSeek Fallout Hits Crypto Hard:
AKT fell 14.9%, RNDR 13.8%, and BTC 5.95%, driving a 6.82% drop in total crypto market cap—wiping out $240B.
AI agent tokens were hit hardest, with many down over 58% this month.
DeepSeek’s release added uncertainty, as lower training costs reduce entry barriers, flooding the market with new projects and intensifying competition.
Crypto losses were smaller in absolute terms but sharper in percentage compared to TradFi.
Source: TradingView
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