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Cambridge AI expert says DeepSeek furore hit on Arm share value ‘a wake-up call’




Shares in Arm Holdings, the Cambridge-based company listed in New York, were down nearly 10 per cent this morning after a new AI chatbot from China sent the US stock market tumbling.

Called DeepSeek, the new app has shaken up the tech landscape due its operating in a similar fashion to OpenAI’s ChatGPT and Google’s Gemini, but its developers say they have achieved these results for a fraction of the cost.

Arm computer chips are found in the vast majority of mobile devices. Picture: Matej Moderc.
Arm computer chips are found in the vast majority of mobile devices. Picture: Matej Moderc.

This has shaken Silicon Valley, which is spending billions on developing AI, and now has the industry looking more closely at DeepSeek and its technology.

According to reports, DeepSeek is powered by an open source model called R1 which its developers claim was trained for around $6m – although this claim has been disputed by others in the AI sector – and how exactly the developers did this still remains unclear.

However, anything close to that figure is still substantially less than the billions of dollars being spent by US firms – OpenAI is said to have spent £4billion last year alone.

This apparent cost-effective approach, and the use of widely available technology to produce – it claims – near industry-leading results for a chatbot, is what has turned the established AI order upside down.

Donald Trump called shares crisis “a wake-up call”
Donald Trump called shares crisis “a wake-up call”

As a result, Silicon Valley has been left to ponder if cutting edge AI can be obtained without necessarily using the latest, and most expensive, tech to build it.

US President Donald Trump is already calling the DeepSeek approach a “wake-up call” for American AI giants. Nvidia, the world's largest AI chipmaker, saw its shares plummet by 17 per cent, erasing $600bn in market capitalisation.

However, Arm’s position is more secure, says Hamza Mudassir, a lecturer in strategy at the Faculty in Strategy and Policy at Cambridge Judge Business School.

Hamza Mudassir, lecturer in strategy at the Faculty in Strategy and Policy at Cambridge Judge Business School
Hamza Mudassir, lecturer in strategy at the Faculty in Strategy and Policy at Cambridge Judge Business School

“This recent dip in shares should serve as a wake-up call,” says Mr Mudassir. “Even low-powered chips can play a pivotal role in AI; for instance, AMD’s integration of DeepSeek with its MI300 chips demonstrates how strategic positioning in AI ecosystems is evolving, even for companies not traditionally associated with excellence in AI. For Arm to pivot effectively, it needs to be focusing on collaborations or acquisitions that address this gap.”

However, he adds: “Taking a step back, it's important to recognize that Arm is not currently a major player in AI hardware or software.

DeepSeek's logo
DeepSeek's logo

“While their PR efforts may paint a different picture, Arm’s core business remains system-on-chip - SoC - designs that excel in low-power applications, such as mobile and some traditional computing - not AI.”

Arm was approached for comment.



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