A Chinese artificial intelligence (AI) model called DeepSeek has taken the tech world by storm, soaring to the top of Apple‘s App Store downloads and shaking up the global AI industry. Its rapid rise has caught the attention of investors, AI experts, and even political leaders, triggering shifts in financial markets and raising questions about China’s growing dominance in AI development.
The latest version of DeepSeek was released on January 20, 2025, it has been making waves among AI professionals and immediately drew the entire tech industry into its spotlight. Today, it is a global phenomenon, triggering debates on innovation, competition, and the future of AI.
Even U.S. President Donald Trump had a word on this matter, describing its success as a “wake-up call” for American companies, which should pay more attention to competing and winning in the AI space.
Why is DeepSeek so special?
What makes DeepSeek stand out is its cost-effective approach to AI development. The company claims that its model was built at a fraction of the cost required for industry-leading AI models like OpenAI’s GPT series.
The lower costs advanced AI chips, which is a breakthrough in AI technology. Developing powerful AI models has required expensive, high-performance chips from companies like Nvidia, but DeepSeek has shown that cutting-edge AI can be built with fewer resources.
This revelation sent shockwaves through the stock market, with Nvidia losing nearly $600 billion (£482bn) in market value on Monday – the largest single-day loss in U.S. stock market history.
China’s Tech Strategy and the AI Race:
DeepSeek’s success also reignited tensions between the U.S. and China over AI and technology leadership. The U.S. government has been trying to contain China’s tech expansion by restricting the export of advanced AI chips. However, Beijing remains committed to becoming a global leader in AI, with President Xi Jinping declaring AI a top priority for China’s economic and technological future.
DeepSeek marks a significant victory for China, as it steps out of old-fashioned manufacturing areas, such as clothing and furniture, and turns to high-tech areas like AI, electric vehicles, and the development of semiconductors.
What Is DeepSeek?
Video Courtesy: Reuters
DeepSeek is a free AI-powered chatbot, similar in functionality to ChatGPT. Users can ask it questions, request assistance with tasks, and engage in human-like conversations. Its performance has been compared to OpenAI’s GPT-4 model, particularly in mathematics and coding tasks.
A key feature of DeepSeek is that it is built as a “reasoning” model. This means it processes responses incrementally, mimicking how humans think through problems. Additionally, it requires less memory than many of its competitors, reducing the overall cost of AI operations.
How Does DeepSeek Handle Censorship?
Like many Chinese AI models, including Baidu’s Ernie and ByteDance’s Doubao, DeepSeek is trained to steer clear of politically sensitive topics.
For example, when asked about the June 4, 1989, massacre in Tiananmen Square, it refused to reply and answered:
“I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses.”
This reflects China’s strict internet censorship policies, that challenge Chinese AI models in most international markets. However, with its core AI capabilities proving to be stronger, its basic model has received training on an accurate data source while incorporating additional censorship layers into it for adaptation to Chinese policies.
How Was DeepSeek Built So Cheaply?
DeepSeek’s development cost is estimated to be just $6 million (£4.8m)—a fraction of the $100+ million that OpenAI reportedly spent on training GPT-4.
Another reason why this is very cost-efficient is because the founder of DeepSeek had stockpiled Nvidia’s A100 chips. These were banned from export to China back in September 2022. Some experts estimate that it bought around 50,000 A100 chips, which allowed the company to build a powerful AI model while pairing them with cheaper, less sophisticated hardware.
DeepSeek Faces Cyberattacks and Website Outages:
On the same day that DeepSeek became the most-downloaded free app on Apple’s App Store in the U.S., the company reported experiencing “large-scale malicious attacks.” These cyberattacks led to restrictions of new user sign-ups, at least for now and also caused its websites to be unavailable on Monday.
Who Is Behind DeepSeek?
DeepSeek was founded in December 2023 by Liang Wenfeng, a Chinese entrepreneur with a background in both AI development and finance.
Liang graduated from Zhejiang University with degrees in electronic information engineering and computer science. However, unlike many Silicon Valley AI pioneers, Liang also has extensive experience in finance and quantitative trading. He is the CEO of High-Flyer, a hedge fund that specializes in AI-driven financial analysis and investment strategies.
How Has DeepSeek Affected Nvidia and U.S. Tech Stocks?
DeepSeek’s success has shaken the financial markets, particularly for tech companies and chip manufacturers. On January 27, 2025, the announcement led to a broad sell-off in the tech-heavy Nasdaq stock market, which fell by over 3%.
Nvidia was the hardest hit, as its stock price plunged by 17% on Monday before beginning to recover slightly on Tuesday. Nvidia had previously been the world’s most valuable company by market capitalization, but its market value dropped from $3.5 trillion to $2.9 trillion, pushing it to third place behind Apple and Microsoft.
China Celebrates DeepSeek’s Rise:
In China, DeepSeek’s rise has been hailed as a major victory for the country’s AI ambitions. Chinese state media highlighted how DeepSeek was “overturning the U.S. stock market”, and experts have noted that its success symbolizes China’s growing independence in technology.
Marina Zhang, an associate professor at the University of Technology Sydney, described DeepSeek as a milestone in China’s AI journey:
“The company’s success is seen as a validation of China’s Innovation 2.0—a new era of homegrown technological leadership driven by a younger generation of entrepreneurs.”
However, she also warned that this nationalistic sentiment could lead to tech isolationism, further escalating the tech rivalry between the U.S. and China.
The AI Battle Heats Up:
DeepSeek’s emergence as a powerful AI competitor has reshaped the industry landscape, challenging Western AI giants like OpenAI and disrupting financial markets. With China pushing for AI dominance and U.S. firms scrambling to keep up, the race for AI supremacy is now more intense than ever.
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