What Happened?
Shares of memory chips maker Micron (NYSE:MU) fell 10.4% in the morning session as stocks heavily tied to the AI market took a hit after Chinese artificial intelligence startup DeepSeek released a new large language model (DeepSeek-R1) that ranks competitively on key global benchmarks (coding competitions, math evaluations), uses less advanced semiconductor chips, costs significantly less to build (at $5.5 million - excluding non-compute costs), and has already achieved strong adoption after topping the iPhone App Store for AI apps.
Notably, the company has also open-sourced this model, a move that may make it harder for rivals to justify huge upfront expenditures on hardware, software, and expertise to develop similar systems.
Speaking at the World Economic Forum in Davos, Switzerland, Microsoft CEO Satya Nadella praised DeepSeek's efforts, calling the new model "super impressive" for its open-source design, efficient inference-time computing, and high compute efficiency. "We should take the developments out of China very, very seriously," he added.
Nadella's comments suggest that upstarts like DeepSeek could reshape the competitive landscape of AI. DeepSeek's announcement disrupts long-held assumptions in key ways: 1.) It undercuts the narrative that bigger budgets and access to top-tier chips are the only ways forward for AI development. 2.) By using less advanced hardware, DeepSeek opens the door for innovators who face high chip costs or export restrictions, reaffirming they can still compete. 3.) The model's success questions the growth narrative of chipmakers like Nvidia—whose soaring valuations depend on the demand for cutting-edge, high-performance hardware.
Overall, DeepSeek's model demonstrates that AI innovation is no longer a race fueled solely by how much you spend, but rather by how resourceful you can be with what you have.
The shares closed the day at $91.12, down 11.7% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Micron? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Micron’s shares are very volatile and have had 21 moves greater than 5% over the last year. But moves this big are rare even for Micron and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 5.3% on the news that peer, SK Hynix, raised concerns about potential demand challenges. During the earnings call, CFO Woo-Hyun Kim stated, "2025's memory demand outlook is clouded by inventory adjustments from PC and smartphone OEMs [original equipment manufacturers] as well as strengthened protective trade policies and geopolitical risks." This cautious outlook highlights broader industry pressures that could also affect competitors like Micron.
Micron is up 5% since the beginning of the year, but at $91.68 per share, it is still trading 40.3% below its 52-week high of $153.45 from June 2024. Investors who bought $1,000 worth of Micron’s shares 5 years ago would now be looking at an investment worth $1,655.
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