What is DeepSeek R1, and Why Did It Trigger a Global Market Sell-Off?

DeepSeek R1 is a state-of-the-art reasoning model developed by the Chinese AI startup DeepSeek.

DeepSeek R1 aims to augment reasoning and analytical capabilities, positioning it as a formidable contender to other prominent AI models such as OpenAI's ol and ChatGPT.

New tech has stoked fears about the competitive edge of U.S.-based tech giants, particularly those heavily invested in artificial intelligence, such as Nvidia and Microsoft.

Nvidia, a leader in AI and chip manufacturing, saw its stock fall nearly 11% in premarket trading. Other tech players, such as AMD and Alphabet, also experienced declines, reflecting broader market unease.

China's foray with Deepseek has fuelled broader concerns about geopolitical tensions and their impact on the technology sector.

Benchmark BSE Sensex tanked 824 points to settle at more than seven-month low. Sensex plunged 1.08% at 75,366.17, while Nifty dropped 1.14% to close at 22,829.15, tanking below the 23,000-level for the first time since June 6, 2024.

While there is no direct impact of DeepSeek on Indian companies, the broader policy implications will keep markets on tenterhooks for a while, including Union Budget on February 1.