A week after its launch, Chinese AI chatbot app DeepSeek has caused a stir in global markets, challenging America’s dominance in artificial intelligence (AI) and sparking a historic sell-off in tech stocks. The app, which quickly became the most downloaded free app on Apple’s US App Store, has disrupted assumptions about AI development costs and efficiency.
Functionally similar to OpenAI’s ChatGPT and Google’s Gemini, DeepSeek engages users with detailed, albeit cautious, responses. It avoids expressing opinions, often labeling topics like politics or personal preferences as “highly subjective.” However, in contrast to its American counterparts, DeepSeek censors discussions on topics deemed sensitive by Chinese authorities, such as the 1989 Tiananmen Square protests.
Built on a mix of Nvidia’s older GPUs, Meta’s Llama architecture, and Alibaba’s Qwen system, DeepSeek claims to have achieved its development at a fraction of the cost incurred by US AI giants. While OpenAI reportedly spent $5 billion in 2023, DeepSeek developers assert their model was built for just $5.6 million—a revelation that has stunned industry experts.
The app’s rapid success triggered significant volatility in US markets. Nvidia, a leader in AI chip design, saw its shares plunge by 17%, erasing nearly $600 billion in market value—the largest single-day loss in US stock market history. Concerns about America’s leadership in AI innovation compounded the sell-off.
DeepSeek’s launch comes as a "Sputnik moment" for the tech industry, according to venture capitalist Marc Andreessen, drawing comparisons to the Soviet Union’s launch of the first satellite in 1957, which jolted US efforts in the space race.
DeepSeek’s ability to deliver a competitive product at minimal cost has raised questions about the resource-heavy approaches of US AI firms. Researchers speculate that the app may point to a new, more efficient development model, though some analysts remain skeptical of the financial claims made by its developers. High-Flyer, DeepSeek founder Liang Wenfung’s hedge fund, has reportedly stockpiled GPUs for years, ensuring a steady supply of resources despite US export restrictions.
Kayla Blomquist, director of the Oxford China Policy Lab, noted that DeepSeek’s emergence signifies a broader shift in China's AI ambitions, with increased government investment signaling a potential paradigm shift in the global AI race.
The US tech industry has responded with mixed reactions. OpenAI CEO Sam Altman acknowledged DeepSeek’s impressive cost-efficiency while reaffirming OpenAI’s commitment to delivering superior models. President Donald Trump, addressing the issue, described the situation as a "wake-up call" for American AI developers to explore cost-effective solutions.
Despite the market turbulence, DeepSeek’s rise underscores a growing competitiveness in AI innovation, potentially accelerating advancements across the sector. As China flexes its technological muscle, the race for AI supremacy appears far from settled.