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

Xing Yang

Finance Research Letters, 2025, vol. 80, issue C

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.

Keywords: Artificial intelligence; Market competition; Firm valuation; Event study (search for similar items in EconPapers)
JEL-codes: G14 G15 L86 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s154461232500707x

DOI: 10.1016/j.frl.2025.107447

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