DeepSeek R1’s Disruption: Winners and Losers in the Generative AI Value Chain

• Chinmay
• February 7, 2025
• Artificial Intelligence
• AI chip market, AI competition, AI cost efficiency, AI infrastructure, AI services, cloud computing, DeepSeek R1, Generative AI, generative AI disruption, Nvidia, OpenAI
• 0 Comments

The release of DeepSeek’s R1 model has sent ripples across the generative AI landscape, shaking up technology stocks and redefining competitive dynamics. With major market players like NVIDIA witnessing a ~20% decline in stock value since January 27, 2025, the implications of this innovation are undeniable. IoT Analytics’ latest research provides a structured analysis of the biggest winners and losers in this evolving ecosystem.

DeepSeek R1: A Game-Changer in Generative AI

DeepSeek R1’s significance lies in its open approach, cost efficiency, and competitive performance, rivaling leading proprietary models. The model’s lower training costs and affordable API access make it a strong alternative to traditional closed AI systems. This shift signals a major transformation in the generative AI industry, leading to a redistribution of value across the AI supply chain.

Key Insights from IoT Analytics

Knud Lasse Lueth, CEO at IoT Analytics, highlights the profound impact of DeepSeek R1:

“DeepSeek R1 is a significant development in the generative AI landscape, reinforcing the shift toward more open, cost-efficient models. With the generative AI market projected to grow at a 52% CAGR through 2030, this innovation accelerates competition and forces proprietary model providers to rethink their value propositions. While NVIDIA still dominates the AI chip market with a 92% share, the emergence of models like R1—trained with fewer high-end GPUs—raises questions about the long-term demand for expensive AI hardware. The biggest beneficiaries of this trend are AI adopters and application providers, who now have access to more affordable and flexible AI options.”

Similarly, Philipp Wegner, Principal Analyst at IoT Analytics, points out:

“DeepSeek R1 showed again that proprietary foundation model providers like OpenAI and Anthropic have little moat. Competition will only get more fierce from here.”

Winners and Losers in the Generative AI Value Chain

IoT Analytics’ in-depth analysis categorizes the impact of DeepSeek R1 on various AI ecosystem players:

Clear Winners

• End Users: Lower-cost AI models reduce expenses for businesses and consumers, making AI more accessible across industries.
• GenAI Application Providers: Companies building AI-powered applications benefit from increased model availability and lower API costs, enabling wider innovation and product expansion.

Likely Winners

• Edge AI/Computing Companies: The shift toward efficient AI models increases demand for local inference on edge devices, reducing dependency on cloud infrastructure.
• Data Management Providers: AI adoption requires advanced data handling capabilities, benefiting platforms like MongoDB and Snowflake.
• GenAI Services Providers: Enterprises need expert guidance to integrate and optimize AI solutions, driving demand for AI consulting and implementation services.

Neutral Impact

• Cloud Computing Providers: While cloud platforms remain essential for AI development, increased model efficiency may reduce infrastructure investment needs.
• EDA (Electronic Design Automation) Software Providers: AI specialization could drive demand for new chip designs while potentially reducing reliance on traditional high-performance GPUs.

Likely Losers

• AI Chip Companies: If future AI models require fewer GPUs for training and inference, companies like NVIDIA may see slower demand growth.
• Data Center Infrastructure: Lower dependency on high-end AI chips could limit growth in networking, cooling, and power supply sectors.

Clear Losers

• Proprietary Model Providers: Companies relying on closed, high-cost AI models, such as OpenAI and Anthropic, face mounting pressure from cost-effective and customizable open alternatives.

The Future of Generative AI

The emergence of DeepSeek R1 signifies a fundamental shift in the generative AI landscape, challenging the traditional dominance of proprietary models. As AI models become more accessible and affordable, businesses and consumers alike stand to benefit. However, this transformation also puts pressure on established players to innovate and rethink their business strategies.

With the generative AI market poised for exponential growth, one thing is clear—openness, efficiency, and adaptability will define the next era of AI innovation.