In brief
"DeepSeek has quickly gained prominence, challenging established AI leaders like ChatGPT by offering a high-performance yet low-cost alternative, raising concerns among US tech companies."
DeepSeek, a Chinese artificial intelligence (AI) application, has made headlines by surpassing ChatGPT and other competitors to become the top-rated free app on the Apple App Store in the US, UK, and China. Launched in January, DeepSeek has disrupted the widespread perception that the United States dominates the AI industry. It operates on the open-source DeepSeek-V3 model, claimed to have been developed at a mere cost of less than $6 million, a stark contrast to the billions invested by rivals, though this assertion has been met with skepticism from some industry experts.The debut of DeepSeek-R1 earlier this month prompted the company to declare that its performance in math, coding, and natural language reasoning competes effectively with OpenAI's latest models. Venture capitalist and Trump advisor Marc Andreessen likened DeepSeek-R1's emergence to "AI's Sputnik moment," referencing the Soviet Union's first artificial Earth satellite launched in 1957.AI models like ChatGPT typically rely on sophisticated chip technology. Since 2021, the US government has restricted advanced chip sales to China. In response, Chinese AI developers have collaborated and experimented to create models that require less computing power, drastically reducing costs and potentially transforming the market.This shift has caused a decline in stock prices for major US AI firms, including Nvidia, Microsoft, and Meta. European companies also felt the effects, with ASML's shares dropping over 10% and Siemens Energy’s plunging 21%. Fiona Cincotta, a senior market analyst, noted that this unexpected arrival of a low-cost AI model poses profitability risks for established competitors who have invested heavily in expensive infrastructure.Moreover, Vey-Sern Ling, a Singapore-based tech equity advisor, warned that DeepSeek's success could disrupt the entire AI investment landscape. However, Wall Street banking giant Citi cautioned that while DeepSeek may challenge American firms like OpenAI, the restrictive environment may hinder Chinese firms' development.Founded in 2023 by Liang Wenfeng in Hangzhou, DeepSeek’s origins include a substantial stock of Nvidia A100 chips—now banned for export to China. Leaning on a combination of these chips with cheaper, accessible alternatives has been pivotal for DeepSeek. Liang was spotted at a meeting with industry experts and Chinese Premier Li Qiang, emphasizing the unexpected sensitivity around pricing in AI. "We were simply following our own pace, calculating costs, and setting prices accordingly," he stated in a July 2024 interview with The China Academy.
