MIAMI, Jan 28 (Reuters) - Hedge fund manager Bridgewater Associates said Chinese startup DeepSeek's launch of its latest artificial intelligence (AI) models could lead to a short-term correction in many tech companies' share prices but is positive for the industry.
The comments come amid a tech stocks sell-off prompted by the release of a free AI assistant launched by DeepSeek last week that the startup said uses less data at a fraction of the cost of services currently available.
DeepSeek's AI Assistant has overtaken rival ChatGPT to become the top-rated free application available on Apple's App Store in the United States, raising doubts about the reasoning behind some U.S. tech companies' decision to pledge billions of dollars in AI investment.
"DeepSeek’s progress is big news, but not bad news for most of the AI ecosystem," Bridgewater said in a note on Monday authored by Co-Chief Investment Officer Greg Jensen and Jas Sekhon, chief scientist of AIA Labs, a division within the hedge fund focused on developing and utilizing AI and machine learning technologies to generate investment strategies and insights.
DeepSeek threatens share prices for many tech stocks in the short term, Bridgewater said.
"This may be especially true for Nvidia, because DeepSeek’s success may encourage companies to invest more in achieving efficiency gains by optimizing how AI software interacts with the hardware," said the note.
Shares in Nvidia (NVDA.O), opens new tab, a leader in the AI chip market, fell 17% on Monday, wiping $593 billion from its market value - a record one-day loss for any company - and dragged U.S. stocks lower. That drop was partly corrected on Tuesday, with Nvidia shares up around 5% in premarket trading.
Still, DeepSeek's progress is overall positive for the development of AI technologies, said the hedge fund, and could accelerate the emergence of non-tech leading companies adopting it more broadly.
"That is the moment when AI adoption becomes as existential to everyone as it is today for Google and Microsoft. It is then that we expect the true bubble to manifest," it said.
Reporting by Carolina Mandl, writing by Davide Barbuscia, editing by Louise Heavens
