US stocks plummeted on Monday following the news of a new artificial intelligence app from a Chinese startup, DeepSeek. Major chip firms were amongst the hardest hit in the AI frenzy, erasing more than a trillion dollars in market cap. The AI model by DeepSeek, developed with fewer chips and lower costs, has sparked fear on Wall Street after it was known to outperform OpenAI’s ChatGPT on several benchmarks.
This frenzy was further fueled by the news that DeepSeek’s AI assistant app has become the most downloaded free app on the Apple store in the United States. Powered by DeepSeek-V3, DeepSeek’s AI assistant has overtaken rival ChatGPT, the innovation by OpenAI that started the AI arms race in the first place.
READ NOW: 10 AI Stocks Making Waves on Wall Street and 11 AI Stocks That Should Be On Your Watchlist
Following the news of DeepSeek topping the charts, the Chinese startup said it will limit its registrations due to a cyber-attack. Before the attack, the company was also hit by a major outage on its website. According to the company’s status page, it had resolved issues relating to its application programming interface and users’ inability to log in to the website. This outage was known to be its longest in 90 days.
While the AI world remains in a state of panic, analysts have been having differing views on the innovation. Some are worried about its impact, while others are taking it on a positive note. Wedbush, for one, isn’t worried about DeepSeek disrupting the planned $2 trillion in capital expenditures anticipated on AI in the coming years. They say that they “view the DeepSeek fear across the tech world as in essence a ‘tech AI head fake’ that will be short-lived.
“DeepSeek created an awesome LLM model (and credit to its software developers) however this Chinese AI small lab/LLM model is not bringing down the entire US tech ecosystem with it”.
– The analysts wrote.
Raymond James believes that these AI innovations can reshape the tech world, lowering costs significantly and reducing the need for massive GPU/XPU clusters at US hyperscalers.
“If DeepSeek’s innovations are adopted broadly, an argument can be made that model training costs could come down significantly even at U.S. hyperscalers, potentially raising questions about the need for 1-million XPU/GPU clusters as projected by some”.
-Raymond James analyst Srini Pajjuri wrote in a note to clients over the weekend.
In turn, Web3 entrepreneur Jeffrey Emanuel is saying that DeepSeek’s success “suggests the entire industry has been massively over-provisioning compute resources”.
Then there are also some experts, such as one Oxford professor, who is advising against putting private data on the DeepSeek platform in case it could be shared with the Chinese state.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Image by Gerd Altmann from Pixabay
10. Aurora Mobile Limited (NASDAQ:JG)
Aurora Mobile Limited (NASDAQ:JG) is a leading mobile big data solutions platform. On January 27, the company announced that its leading enterprise AI agent platform, GPTBots.ai, has successfully integrated the popular DeepSeek R1 large language model (LLM). GPTBots.ai already boasts several AI capabilities including OpenAI, Azure, Meta Llama, Mistral AI, and more. The addition of the r1 language model will further add to their robust ecosystem and offer businesses cutting-edge AI solutions. Boasting a range of advanced LLMs, GPTBots.ai will allow enterprises to choose from its extensive line-up based on their enterprise needs.
“The integration of DeepSeek R1 aligns perfectly with our mission to empower enterprises with advanced AI solutions and unmatched flexibility. With this addition, we’re enabling businesses to tackle complex challenges with greater efficiency and flexibility, while maintaining the highest standards of enterprise performance”.
-Jerry Yin, VP of GPTBots.ai.
9. Hut 8 Corp. (NASDAQ:HUT)
Number of Hedge Fund Holders: 22
Hut 8 Corp. (NASDAQ:HUT) operates as a Bitcoin miner and a vertically integrated operator of energy infrastructure. According to Piper Sandler, the selloff yesterday in shares of bitcoin miners was overdone, with the artificial intelligence tradeoff driving a 16% average decline for mining names that the firm covers. The firm contended that the miners’ AI-related value lies in their immediate access to power and also in the opportunity to sell that power to AI companies. In light of this, the DeepSeek frenzy should have, in turn, catalyzed the “arms race” among U.S. AI companies, rather than triggering the surprising stock fallout. Piper Sandler further stated that DeepSeek’s reportedly low training costs may imply a reevaluation of the spending required for data center buildouts, but it does not believe this will significantly impact AI’s short-term power needs. The firm maintains a “Buy” rating on Hut 8 with a price target of $33.00.