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AI competition and firm value: Evidence from DeepSeek’s disruption

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  • Yang, Xing

Abstract

DeepSeek’s recent breakthrough has intensified the debate over global AI competition. Using real-time data from Yahoo Finance, I find strong evidence that U.S. AI firms respond positively to the release of the DeepSeek R1 model, contradicting media concerns that disruptive AI competition harms firm value. A heterogeneity analysis reveals that firms with fewer resources experience stronger initial gains but underperform their more resource-rich counterparts over longer event windows. Additionally, GPU providers faced negative market reactions, suggesting that cost-efficient AI models may reduce reliance on large-scale GPU infrastructure. This research provides timely insights into the evolving impact of AI competition on firm valuation and industry dynamics.

Suggested Citation

  • Yang, Xing, 2025. "AI competition and firm value: Evidence from DeepSeek’s disruption," Finance Research Letters, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:finlet:v:80:y:2025:i:c:s154461232500707x
    DOI: 10.1016/j.frl.2025.107447
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    Keywords

    Artificial intelligence; Market competition; Firm valuation; Event study;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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