Chinese artificial intelligence company, DeepSeek, has shaken up America’s AI dominance by creating a model it claims to be much cheaper than its rivals.
DeepSeek has become the most downloaded free app in the US just a week after it was launched leading US President Donald Trump to say that its rise is “a wake-up call” for the US tech industry.
Several media outlets called the launch of DeepSeek’s R1 model a “Sputnik moment” for the US.
They referred to the time when the US realized it was falling behind the Soviet Union in space exploration and technological advancement. This awakening was sparked by the Soviet Union’s successful launch of Sputnik 1 on October 4, 1957, the world’s first artificial satellite. The event was a profound shock to the US.
DeepSeek, a one-year-old startup, revealed a stunning capability last week: It presented R1, which has all the familiar abilities, operating at a fraction of the cost of OpenAI’s, Google’s or Meta’s popular AI models. The company said it had spent just $5.6 million on computing power for its base model, compared with the hundreds of millions or billions of dollars US companies spend on their AI technologies.
DeepSeek AI sends shockwaves into markets
That sent shockwaves through markets, in particular the tech sector, on Monday.
The tech-heavy Nasdaq plunged by 3.1 percent and the broader S&P 500 fell 1.5 percent. The Dow, boosted by health care and consumer companies that could be hurt by AI, was up 289 points, or about 0.7 percent higher. Stock market losses were far deeper at the beginning of the day.
Its emergence comes as the US is restricting the sale of the advanced chip technology that powers AI to China. To continue their work without steady supplies of imported advanced chips, Chinese AI developers have shared their work with each other and experimented with new approaches to the technology.
This has resulted in AI models that require far less computing power than before. It also means that they cost a lot less than previously thought possible, which has the potential to upend the industry.
DeepSeek’s technology has been praised by high-profile figures including OpenAI chief Sam Altman who called it “an impressive model, particularly around what they’re able to deliver for the price,” though he added that OpenAI would “obviously deliver much better models” moving forward.
The Chinese company claims its model can be trained on 2,000 specialized chips compared to an estimated 16,000 for leading models.
But not everyone is convinced. Some have cast doubt on some of DeepSeek’s claims, including tech mogul Elon Musk. He responded to a post which claimed that DeepSeek actually has around 50,000 Nvidia chips that have now been banned from export to China, saying: “Obviously.”
Related: China’s Roadmap for Advancing Brain-Computer Interfaces
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