Since the public launch of DeepSeek, a new AI protocol from China, last Friday, there has been a significant downturn in crypto mining stocks.

DeepSeek, originally a project by a hedge fund with limited hardware access, has disrupted the traditional AI research landscape with its unexpected success.

The arrival of DeepSeek has had a severe impact on renowned mining stocks like Nvidia, causing a substantial crash in the broader AI market. Companies heavily reliant on Nvidia hardware for their operations such as Marathon and RIOT have also experienced significant declines. Despite their previously strong performance and substantial Bitcoin holdings, these firms have seen their stock values tumble. For instance, Cipher Mining, a publicly listed Bitcoin mining data center, witnessed a 25% drop in its stock price recently.

Tech journalist Ed Zitron commented on the situation, suggesting that the valuation of AI-driven companies was artificially inflated. He highlighted that DeepSeek's success was not primarily due to its AI capabilities, but rather its unique operational approach and efficient use of capital resources, contrasting the extravagant capital expenditures of other AI firms in the market.

As a result of DeepSeek's disruptive impact, AI investors are reevaluating their strategies and questioning the necessity of large investments in processing power. With President Trump's announcement of a substantial funding initiative for AI research moving forward, the market is now contemplating the effectiveness of different approaches in the AI development sector.

In essence, DeepSeek, a relatively new player in the field, has challenged the conventional norms of AI research and may have redefined the principles driving the industry, posing a significant challenge to established players like Nvidia.