World’s Richest People Lose $108 Billion After DeepSeek Selloff

On Monday, the wealth of the world’s 500 richest individuals took a significant hit, with a staggering loss of $108 billion. This decline was largely attributed to a massive selloff in the technology sector, triggered by the rising prominence of a Chinese AI developer named DeepSeek.

The biggest losses were felt by billionaires with their fortunes tied to artificial intelligence. Leading the pack, Jensen Huang, the co-founder of Nvidia Corp., saw his wealth decrease by $20.1 billion, reflecting a 20% drop. Oracle Corp. co-founder Larry Ellison faced a larger loss in absolute terms, shedding $22.6 billion, which was about 12% of his wealth. Meanwhile, Dell Inc.’s Michael Dell saw a loss of $13 billion, and Changpeng “CZ” Zhao, co-founder of Binance Holdings Ltd., lost $12.1 billion.

The tech sector overall witnessed approximately $94 billion of wealth evaporate, accounting for around 85% of the total decline reported by the Bloomberg Billionaires Index. The Nasdaq Composite Index dropped by 3.1%, while the S&P 500 lost 1.5% during the trading session.

DeepSeek Emerges

DeepSeek, located in Hangzhou, has been developing artificial intelligence models since 2023. The company surged into the limelight over the weekend when its DeepSeek R1 chatbot app topped download charts globally, gaining immense popularity. As a result, the app experienced so much traffic that it faced outages and had to limit new signups to users with Chinese phone numbers.

This unexpected emergence posed a challenge to established narratives in Silicon Valley, suggesting that large capital investments are essential for developing the best AI models. DeepSeek’s entry into the competitive landscape comes with a development cost of just $5.6 million, raising doubts among investors regarding Silicon Valley's costly model, which has dominated equity markets over the past two years.

Capital Spending Trends

Many prominent tech companies, referred to as AI hyperscalers, including Meta Platforms Inc., Alphabet Inc. (parent company of Google), and Microsoft Corp., have gained substantial wealth following the launch of OpenAI's ChatGPT in November 2022. These companies have primarily followed a financial strategy centered around major investments to develop AI systems, securing high-quality semiconductors and energy resources necessary for operations.

For instance, Meta’s CEO Mark Zuckerberg announced plans to allocate $60 to $65 billion for AI projects this year, exceeding Wall Street predictions. Projections suggest that capital expenditures among major tech firms could reach $200 billion by 2025.

Wealth Gains Amid Lost Billions

Despite the notable losses sustained by Huang and Ellison, other tech billionaires managed to see their fortunes remain stable or even grow. Zuckerberg's net worth increased by $4.3 billion as Meta shares recovered from earlier declines, while Jeff Bezos experienced a wealth increase of about $632 million.

Chinese Competitors and Their Resources

The remarkable fact that DeepSeek successfully created a competitive AI model at a fraction of the cost casts doubt on the conventional wisdom prevailing in Silicon Valley about the need for hefty investments. One of the factors enabling DeepSeek's rapid development is the limited access Chinese companies have to high-performance GPUs (Graphics Processing Units) due to U.S. export restrictions on advanced chips.

In a recent interview with CNBC, Alexandr Wang, the CEO of Scale AI, noted that despite these controls, Chinese developers likely have access to more GPUs than many in Silicon Valley might believe. Wang pointed out that DeepSeek allegedly has around 50,000 of Nvidia's top AI chips, which they cannot openly discuss due to export regulations from the U.S.

billionaires, technology, AI