Hands up! Who remembers the dot.com bust?I do. It was March 10, 2000. The NASDAQ Composite index peaked at 5,048.62 points. That doesnt sound like much today, but it was up 800% from 1995. Then people started to get nervous about the true value of the dot.com businesses driving the market, interest rates started to rise, and by October 2002, the NASDAQ had fallen 78% from its peak.Were not even a month into 2025, and the new Chinese AI programDeepSeekthis week sparked Nvidias $465 billion rout, the biggest single-day drop in US stock market history.This is just the beginning. Its not thatDeepSeek is so much better than ChatGPTs OpenAIor any of the other popular generative AI (genAI) tools. Maybe it is, maybe it isnt. (Just dont ask it about what happened at Tiananmen Square in 1989.)No, what matters is that DeepSeek requires an order-of-magnitude less computing power to achieve similar results. By programmer Simon Willisons count, DeepSeek v3 trained on 2,788,000 H800 GPU hours at an estimated cost of $5,576,000.For comparison, Meta AIs Llama 3.1 405B (fewer than DeepSeek v3s 685B parameters)trained on 11x that; it required more than 30.8 million GPU hours and was trained on 15 trillion tokens of data.What does all that mean? As Larry Dignan, editor-in-chief ofConstellation Insights, explained, You can get API access to DeepSeeks R1 model for 14 cents for a million tokenscompared to OpenAIs $7.50.In other words, large language models (LLM) pricing is going to collapse.The scary part is the LLM giants didnt have profit margins to begin with, he continued. LLMs are going to commodity in a hurry. Thats bad news for companies such as OpenAI. Sure,the companys market value stands at $157 billion but its still losing billions of dollars. If OpenAIs customers decide they dont want to pay its rates when they can get much the same service for a fraction of the cost from DeepSeek, where does that leave OpenAI?What happens then? Look at it this way: todays overheated stock market is driven by theMagnificent Seven companies that with one exception (Tesla) have one thing incommon: theyre all heavily invested in AI hype. Even Tesla is heavily invested in what Elon Musk calls real-world AI.Its not just the Magnificent Seven; pick-and-shovel AI companies such as Oracle, Super Micro, and Nebius (formerly Yandex)are also in a world of trouble.If anyone can buildLLMswithout a ton of money, why exactly is Nvidia worth trillions? Couldnt someone disrupt Microsoft, Meta, or Google? Indeed,Perplexitys AI chatbot is already better than Google at search. Its not just people like me for whom search is part of what they do for a living;businesses are also turning to Perplexity from Google.Bratin Saha,DigitalOceans chief product and technology officer, sees the potential for a relatively small company to become a big player. DeepSeek AI is the Android moment for AI (given that ChatGPT was likened to the iPhone moment for AI), as it shows groundbreaking AI products from the open-source community, Saha told me.DeepSeek AI democratizes AI and cloud computing because it shows you do not need multi-billion dollar investments for compelling innovation, he said. It lowers the barrier for small and medium enterprises and individual developers to work with AI.Exactly.The way Stephen OGrady, co-founder and industry analyst withRedMonk,sees it, enterprises have two major AI concerns. How trustworthy the technology is and its cost. As OGrady points out, Enterprises have been shocked, in many cases, at the unexpected costs and unclear returns from some scale investments in AI.Hes got that right. OGrady continued, noting that DeepSeek challenges some core assumptions by enterprises. These are:What if enterprises dont have to rely on closed, private models for leading-edge capabilities?What if training costs could be reduced by an order of magnitude or more?What if they dont require expensive, state-of-the-art hardware to run their models?This changes everything for businesses that want to use AI and multi-billion dollar companies that want to sell AI to you. Its a sea change.What the markets reacted to was DeepSeeks ability to build a model that rivaled OpenAIs sophisticated o1 reasoning model and Anthropics Sonnet model for pennies on the dollar on a fraction of the compute, Jim Zemlin, executive director of theLinux Foundation, wrote. It also appears that DeepSeek did this using well-known techniques. There were no massive algorithmic breakthroughs, just very clever engineering.DeepSeek, he noted, uses open-source software. Yes, technically, part of it isnt open source, but one ofDeepSeeks models is under the MIT License. As Stefano Maffulli, the Open Source Initiative (OSI) executive director, pointed out,DeekSeeks models also fail to be open.Still,a small team in China took a fresh look at a problem and came up with a novel approach that reduced the cost of chain-of-thought reasoning by 50x (if DeepSeeks postings are accurate) and then published a paper fully describing their process, allowing the community to benefit from their learnings, Zemlin said. We need MORE of this progress, not less. This is a struggle over open markets between the forces of open and the forces of closed.That may be good for open source and for AI, but for our stock market, which is largely driven by AI, its another matter. The Magnificent Sevenaccounted for over 50% of the S&P 500s gains in 2024. If they collapse, a good chunk of the market will follow.Im not normally a bear, but Ive seen this rodeo before. Oh, AI will survive, and eventually, it will prove useful and profitable. But, in the meantime, I can see an AI crash coming, and it wont be pretty.