A New AI Powerhouse Emerges
DeepSeek, a Chinese artificial intelligence (AI) startup, has taken the world by storm. Its latest model, DeepSeek R1, has not only topped app download charts but also triggered a decline in US tech stocks.
Released in January, DeepSeek R1 has been compared to OpenAI’s cutting-edge models, boasting similar capabilities but at a fraction of the cost. This rapid rise has shaken investor confidence in US AI dominance, wiping billions from Nvidia’s market value and raising concerns about whether American firms can maintain their lead in AI development.
Even former President Donald Trump called it a “wake-up call” for US tech companies.
Understanding AI and DeepSeek’s Impact
AI enables machines to learn, solve problems, and simulate human-like conversations. Recent advancements in generative AI, such as ChatGPT, allow software to generate new content by analyzing vast amounts of data. However, these tools are not without flaws—they can create misinformation and perpetuate biases present in their training data.
Millions use AI-powered chatbots for tasks like writing emails, summarizing text, and even coding. DeepSeek is one such chatbot, functioning similarly to ChatGPT.
It is reportedly on par with OpenAI’s o1 model in tasks like mathematics and coding. As a “reasoning” model, DeepSeek R1 generates responses incrementally, mimicking human problem-solving processes.
DeepSeek claims to have developed this technology at a fraction of OpenAI’s cost. While OpenAI’s Sam Altman suggested GPT-4 required over $100 million to train, DeepSeek R1 was reportedly built for just $6 million.
How DeepSeek Overcame US Chip Restrictions
US restrictions have limited China’s access to advanced AI chips, but DeepSeek found a way around these hurdles. Its founder, Liang Wenfeng, stockpiled Nvidia A100 chips before they were banned for export to China in 2022. Experts believe he then combined them with cheaper, less advanced chips to create a highly efficient model.
DeepSeek also optimizes memory usage, reducing the cost of running AI tasks. This combination of affordability and performance helped DeepSeek R1 become the most downloaded free app on Apple’s App Store upon its US release.
However, the launch wasn’t without issues. The company reported “large-scale malicious attacks” that forced temporary registration limits, and its website suffered outages.
Like other Chinese AI models such as Baidu’s Ernie and ByteDance’s Doubao, DeepSeek R1 is programmed to avoid politically sensitive topics. For instance, when asked about the Tiananmen Square massacre, the chatbot avoided giving details—reflecting China’s strict government censorship.
Who is Behind DeepSeek?
DeepSeek was founded in December 2023 by Liang Wenfeng, an entrepreneur with a background in both AI and finance. A graduate of Zhejiang University, Liang is also the CEO of High-Flyer, a quantitative trading hedge fund that leverages AI to analyze financial markets.
In 2019, High-Flyer became the first quant hedge fund in China to raise over 100 billion yuan ($13 million). Liang has long pushed for China’s AI sector to move beyond imitation and become a leader in innovation.
His bold vision has drawn international attention—and scrutiny.
Global Scrutiny and Market Reactions
DeepSeek’s rapid rise has rattled global markets and regulatory agencies. Australia has banned DeepSeek from government devices over national security concerns. Italy followed suit, blocking the app and ordering the company to halt data processing for Italian citizens. Other regulators have also raised concerns over how DeepSeek handles user data, which is stored on China-based servers.
Financial markets reacted sharply. DeepSeek’s success challenged the belief that only the biggest budgets and most powerful chips could drive AI innovation. This uncertainty led to a sell-off in tech stocks, with the Nasdaq dropping over 3% on January 27.
Nvidia, previously the world’s most valuable company by market capitalization, saw its stock price plunge 17% before rebounding. The company fell to third place behind Apple and Microsoft, with its market value dropping from $3.5 trillion to $2.9 trillion.
Unlike OpenAI, DeepSeek remains privately owned, meaning investors cannot buy its stock—yet.
China’s Perspective on DeepSeek’s Rise
DeepSeek’s success is a significant win for China’s tech ambitions. While the Chinese government has yet to comment, state media has celebrated the company’s impact, highlighting how it has “shaken” Silicon Valley and Wall Street.
According to Marina Zhang, an associate professor at the University of Technology Sydney, DeepSeek’s rise is seen as proof of China’s growing technological independence. However, she warns that this might also lead to “tech isolationism” as China prioritizes self-reliance.
DeepSeek’s emergence marks a pivotal moment in the AI race—one that could redefine global competition in the sector.
Additional reporting by João da Silva and Liv McMahon
