A new Chinese artificial intelligence model, DeepSeek, has shaken the tech world by surpassing US-based AI models like ChatGPT in performance while being developed at a fraction of the cost.
The sudden emergence of DeepSeek has sent shockwaves through US markets, with shares in Nvidia, Microsoft, and Meta plummeting.
The DeepSeek app, launched last week, became the most downloaded free app on Apple’s US App Store, displacing OpenAI’s ChatGPT. This remarkable feat has stunned many in the tech industry, as DeepSeek’s AI model, R1, was developed for just $5.6 million, a stark contrast to the billions invested by US tech giants.
US President Donald Trump called DeepSeek’s emergence a “wake-up call” for Silicon Valley, saying US tech giants must be “laser-focused on competing to win.”
Trump’s comments came as the US tech sector struggles to accept the implications of DeepSeek’s rise.
The development of DeepSeek’s R1 model is attributed to the company’s founder, Liang Wenfeng, an engineer and entrepreneur with a background in AI and quantitative finance. Liang’s team at DeepSeek mainly consists of fresh graduates from top Chinese universities like Tsinghua and Peking University.
DeepSeek’s AI model is powered by the open-source DeepSeek-V3 model, which its researchers claim was developed for less than $6 million. This cost-efficient approach has raised concerns about the viability of continued massive investments in AI development by US tech giants.
American AI’s React
OpenAI CEO Sam Altman acknowledged DeepSeek’s R1 as “an impressive model, particularly around what they’re able to deliver for the price“. He pledged to speed up OpenAI’s releases.
Altman’s comments were an attempt to reassure investors and the public that OpenAI remains committed to developing cutting-edge AI technology.
The emergence of DeepSeek has also sparked concerns about data privacy and security.
Australia’s Science Minister Ed Husic recently urged users to exercise caution when downloading the chatbot. “There are a lot of questions that will need to be answered in time on quality, consumer preferences, data, and privacy management,” Husic said.
As the tech world grapples with the implications of DeepSeek’s rise, many question the future of US dominance in the AI industry.
Who Dominates the AI Space?
Kathleen Brooks, research director at XTB, warned that “tech dominance is being challenged by China” and that the focus should now be on ensuring the US wins the AI race.
The rise of DeepSeek has also led to accusations of secret collaborations with US companies.
Elon Musk, who has invested heavily in Nvidia chips for his company xAI, suspects DeepSeek of secretly accessing banned H100 chips. However, these accusations have been met with scepticism, with some arguing that they “sound like a rich kids team got outplayed by a poor kids team.“
Nvidia has denied any wrongdoing, stating that DeepSeek’s technology is “fully export control compliant.” However, the company’s shares plummeted 17% on Monday, wiping nearly $600 billion of its market value.
Tech Stocks React
DeepSeek’s emergence was felt across US markets. The tech-rich Nasdaq index finished down more than 3%. Shares in Microsoft and Meta also fell, while the Dow advanced 0.7%.
The development comes amid a US government push to ban Chinese-owned TikTok in the United States or force its sale.
The rise of DeepSeek has added fuel to the fire, with many calling for increased scrutiny of Chinese tech companies operating in the US.
David Sacks, Trump’s AI advisor and prominent tech investor, said DeepSeek’s success justified the White House’s decision to reverse executive orders issued under Joe Biden that established safety standards for AI development.
“The regulations would have hamstrung American AI companies without any guarantee that China would follow suit,” Sacks wrote on X.
As the US tech sector struggles to accept the implications of DeepSeek’s rise, one thing is clear: the AI landscape has been forever altered, and US tech giants must adapt to stay competitive.
Everyone is wondering what’s next for DeepSeek and how the US will respond to this new challenger in the AI space.
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