A new Chinese AI model called DeepSeek has skyrocketed to the top of the Apple Store’s download charts, surprising tech investors and rattling some major players in the industry. This unexpected success has sent shockwaves through the tech world, even shaking up stock markets.
DeepSeek launched on January 20 and first caught the attention of AI enthusiasts before becoming a global sensation. It wasn’t long before the entire tech industry, along with the world, took notice. Even former U.S. President Donald Trump weighed in, calling it a “wake-up call” for American companies to advance their game in the AI race.
So, what’s so special about DeepSeek?
The model’s creators claim they built it for a fraction of the cost it takes to develop industry-leading AI systems like OpenAI’s models. How? By cleverly using fewer advanced and expensive chips, which challenges the assumption that cutting-edge AI always requires a massive budget and the priciest hardware.
This revelation caused chaos in the stock market—Nvidia, the chip-making titan, lost nearly $600 billion in market value in a single day, the biggest one-day loss in U.S. history. Why? Because if AI can advance without relying on Nvidia’s top-of-the-line chips, it raises serious questions about the future of the chip industry.
DeepSeek’s success also casts a spotlight on the ongoing tech battle between the U.S. and China. Washington has tried to slow down China’s tech ambitions by banning the export of advanced chips, but Beijing seems undeterred. President Xi Jinping has prioritised AI, pushing China to evolve from making goods like clothes and furniture to dominating high-tech sectors like AI, electric vehicles, and chips.
What exactly is DeepSeek?
At its core, DeepSeek is an AI chatbot, similar to ChatGPT. The app, now dominating Apple’s app store, is marketed as a tool designed to “answer your questions and improve your life.”
What sets it apart is its AI engine, called R1, which boasts an impressive 670 billion parameters—the largest open-source model yet. This means it’s extremely powerful, capable of excelling in areas like math, coding, and logical reasoning. In fact, some experts believe it’s on par with OpenAI’s flagship models.
However, DeepSeek, like other Chinese AI models (such as Baidu’s Ernie), avoids politically sensitive topics. For example, when asked about the Tiananmen Square massacre, the app refused to provide details, stating: “I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses.” This reflects the challenges of developing AI under China’s strict censorship but also highlights how the company has managed to train a complex model while adhering to these rules.
Interestingly, DeepSeek’s budget is another shocker—it reportedly cost just $6 million to develop, a stark contrast to the billions spent by U.S. AI firms. The secret? Its founder, Liang Wenfeng, allegedly stockpiled Nvidia A100 chips before their export to China was banned in 2022. He then paired these advanced chips with cheaper alternatives to build a powerful yet cost-effective system.
Who is Liang Wenfeng?
Liang Wenfeng, the brains behind DeepSeek, has suddenly become a big name in the global AI scene. A graduate of Zhejiang University with degrees in engineering and computer science, Liang has a unique background that blends tech expertise with finance.
Before diving into AI, Liang founded High-Flyer, a hedge fund that uses AI for quantitative trading (analyzing data to make smarter investments). High-Flyer was the first of its kind in China to raise over 100 billion yuan. Liang’s vision for AI has always been ambitious—he’s spoken about how China must stop being a follower and start leading in innovation.
When asked why DeepSeek surprised Silicon Valley, Liang simply said, “Their shock comes from seeing a Chinese company not just playing catch-up but actually leading the way as innovators.”
How did U.S. companies react?
DeepSeek has shaken up the belief that only big budgets and cutting-edge chips can drive AI progress. This raises tough questions for companies like OpenAI, valued at $157 billion, about whether their massive spending and high valuations can deliver sustained innovation.
The ripple effects hit financial markets hard. On January 27, the tech-heavy Nasdaq fell more than 3%, and chip-making companies like Nvidia saw their stock prices plunge. Nvidia, once the most valuable company by market cap, fell to third place (after Apple and Microsoft), losing $600 billion in value in just one day.
What’s China’s take?
China is celebrating DeepSeek’s success as a major win in its tech race with the U.S. While the government hasn’t officially commented, Chinese state media is highlighting the disruption DeepSeek caused on Wall Street, framing it as a sign of growing Chinese dominance.
Experts see this as a validation of China’s shift toward innovation-driven growth, led by a younger generation of entrepreneurs. However, some caution that this could lead to “tech isolationism,” where China focuses inward rather than collaborating globally.
DeepSeek’s rise is a wake-up call for the global tech community. It not only challenges how AI is developed but also reshapes the competitive landscape between the U.S. and China in this high-stakes industry. Whether it’s a one-time fluke or the start of a broader shift remains to be seen, but for now, all eyes are on DeepSeek.