One Year After the DeepSeek “Crash”: Why the Market Was Wrong, But the Danger is Real
It has been exactly 12 months since the “DeepSeek Shock” of January 2025.
Do you remember the headlines? The markets panicked. Nvidia shed nearly $600 billion in value overnight. The narrative was cemented instantly: Chinese open-source models have commoditised intelligence. The chip monopoly is over. The AI bubble has burst.
Fast forward to today, January 2026.
Nvidia stock has not only recovered; it is up 58% from those lows. The “bubble” didn’t pop—it hardened. But while Wall Street was busy hyperventilating over chip prices, a far more significant, silent shift has taken place in the global business landscape.
We have moved from the Model Wars (who has the smartest chatbot?) to the era of Sovereign AI (who owns the infrastructure?).
The Mirage of Commoditisation
The fear in 2025 was that cheap, efficient reasoning models (like DeepSeek-V3 and R1) would make massive compute spend unnecessary. That turned out to be a mirage. As recent reports confirm, while reasoning did get cheaper, the demand for “Agentic AI”—systems that don’t just talk but do work—has exploded.
We aren’t seeing a reduction in spend. We are seeing a reclassification of spend.
Just this week, major players like JPMorgan Chase officially reclassified their AI investments from “R&D” to “Critical Core Infrastructure”. This is not a semantic change. It is an admission that AI is no longer an experiment; it is the electricity grid of the modern enterprise.
The Rise of the “Sovereign Stack”
The most under-reported story of the last 24 hours isn’t about a chatbot; it is the strategic partnership between SAP and Fresenius to build a “Sovereign AI” backbone for healthcare.
Why does this matter?
Because it signals the end of the “General Purpose” honeymoon. For two years, businesses were happy to rent intelligence from OpenAI, Google, or Anthropic. They uploaded their data to the public cloud and hoped for the best.
That era is closing.
The lesson of the DeepSeek panic wasn’t that “models are cheap.” It was that dependency is dangerous. If a geopolitical shift or a model update can wipe billions off a market cap, you cannot afford to build your house on rented land.
We are seeing a rush towards Sovereign AI: bespoke, private, highly governed AI ecosystems that sit inside the corporate firewall.
- Data Sovereignty: Companies are no longer asking “Can AI read this?” They are asking “Where does the inference happen?”
- Vertical Specialisation: Generic models are losing ground to “Agentic Swarms” trained on proprietary, vertical-specific data (e.g., healthcare, legal, finance).
Strategic Advice for Leaders in 2026
If you are still debating which LLM subscription to buy for your team, you are fighting the last war. Here is where you need to focus:
- Stop Renting, Start Owning: Move your strategy from “consuming APIs” to “building assets.” Your competitive advantage is not using GPT-5; it is the proprietary data layer you build on top of it. If your AI strategy relies entirely on an external vendor’s roadmap, you do not have a strategy—you have a subscription.
- Prepare for the “Agentic” Workforce: The labour market data from the UK this week is stark: AI is driving net job restructuring, not just displacement. The roles being hired for today—”Agentic Workflow Architects,” “Sovereign Data Custodians”—didn’t exist 18 months ago. You need to audit your talent not for “AI literacy,” but for “AI orchestration.”
- Governance is the Product: With the EU AI Act now biting and new “Sovereign” standards emerging, governance is no longer a compliance hurdle; it is a premium feature. If you can prove your AI is auditable, contained, and sovereign, you can charge a premium over competitors using “black box” public models.
Conclusion
The “DeepSeek Crash” of 2025 was a pricing correction. The “Sovereign Shift” of 2026 is a structural revolution.
The question for your business this year is simple: Are you building a Sovereign Intelligence, or are you just a tenant in someone else’s digital brain?
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