Dublin, Ireland Jan 30-The rapid rise of Chinese AI company DeepSeek has sent shockwaves through the global tech industry, prompting US President Donald Trump to call it “a wake-up call” for American innovation.
The emergence of its artificial intelligence (AI) model has sparked concern on Wall Street, leading to significant market fluctuations.
Major tech firms, including Nvidia, saw their shares tumble, with the chip-making giant losing nearly $600 billion (£482 billion) in market value.
The catalyst for this upheaval is DeepSeek’s claim that its R1 model was developed at a fraction of the cost of its Western competitors, raising critical questions about the future of America’s AI dominance and the enormous investments US firms have been making in the field.
Within just a week of its launch, DeepSeek has become the most downloaded free app in the United States. Responding to the development, Trump suggested that China’s AI advancements could, in some ways, be beneficial for the US.
“If you can achieve the same results at a lower cost, that’s not necessarily a bad thing for us,” he remarked while speaking to reporters aboard Air Force One. He also downplayed concerns over the breakthrough, asserting that the US remains the dominant player in the AI sector.
Despite the excitement, DeepSeek has raised cybersecurity concerns in several countries. Australian Science Minister Ed Husic has urged caution, stating, “There are numerous questions regarding quality, consumer preferences, and data privacy management that need to be addressed over time.”
DeepSeek’s technology is powered by the open-source DeepSeek-V3 model, which its researchers claim was trained for approximately $6 million (£4.2 million)—a fraction of the billions spent by its Western counterparts. However, some industry experts have questioned the validity of these cost claims.
The company’s rise comes at a time when the US is tightening restrictions on the export of advanced chip technology to China. In response, Chinese AI developers have been forced to collaborate and explore alternative technological approaches.
This has led to the creation of AI models that require significantly less computing power, drastically reducing costs and potentially reshaping the industry.
Following the turmoil in US markets on Monday, the FTSE 100 index of the UK’s largest publicly-listed companies showed resilience, rising by 0.46% in early Tuesday trading.
Meanwhile, futures on the Nasdaq, a tech-heavy index, saw a modest 0.1% increase after Nvidia stock recovered slightly in after-hours trading.
However, the impact in Asia was stark. Shares in major Japanese AI-related firms, including Advantest, SoftBank, and Tokyo Electron, plummeted, contributing to a 1.4% decline in Japan’s benchmark Nikkei 225 index.
Many Asian markets remain closed for the Lunar New Year holiday, with mainland China’s financial markets set to reopen on February 5.
Who Founded DeepSeek?
DeepSeek was established in 2023 by Liang Wenfeng in Hangzhou, a city in southeastern China. Liang, a 40-year-old electronic engineering graduate, also founded the hedge fund that financially backed DeepSeek. His prominence in the tech industry was further solidified when he was recently seen attending a high-level meeting with Chinese Premier Li Qiang.
In a July 2024 interview with The China Academy, Liang expressed surprise at the global reaction to his AI model’s pricing. “We didn’t anticipate that pricing would be such a sensitive issue,” he said. “We simply followed our calculations and set our prices accordingly.”
DeepSeek-R1, launched earlier this month, has been touted as having “performance on par with” OpenAI’s latest models in tasks such as mathematics, coding, and natural language reasoning.
The model has received praise from high-profile figures, including OpenAI CEO Sam Altman, who described it as “an impressive model, particularly given its price point.” However, he was quick to assert that OpenAI would continue to deliver superior models moving forward.
“DeepSeek’s ability to compete with US models despite limited access to advanced hardware highlights how software ingenuity and data efficiency can offset hardware limitations,” noted Marina Zhang, an associate professor at the University of Technology Sydney specializing in China’s high-tech industries.
Ion Stoica, co-founder and executive chair of AI software company Databricks, suggested that DeepSeek’s lower costs could accelerate AI adoption. “If AI becomes more affordable, its progress will accelerate, expanding the market faster and increasing its overall value,” he said.
DeepSeek claims that its model can be trained using just 2,000 specialized chips, compared to the estimated 16,000 required for leading AI models.
However, some skeptics remain unconvinced. Tech mogul Elon Musk has cast doubt on DeepSeek’s claims, responding to speculation that the company actually possesses around 50,000 Nvidia chips—now banned from export to China—with a one-word reply: “Obviously.”
As the AI race between China and the US intensifies, the global tech industry watches closely, uncertain of what the future holds for AI innovation, market dynamics, and technological leadership.
