DeepSeek: Chinese AI App Shakes Markets, Challenges Global Tech Giants
The rapid rise of Chinese AI app DeepSeek has triggered a selloff in major tech stocks, as the app surpassed rivals like ChatGPT to become the top-rated free app on Apple’s App Store.
Shares of tech heavyweights such as Nvidia, Microsoft, and Meta were poised to open lower on Monday, while European markets also felt the impact.
Since its launch, DeepSeek has gained massive popularity, challenging the perception that the United States is the uncontested leader in AI. It has also raised questions about the scale of investments planned by American tech firms.
Powered by the open-source DeepSeek-V3 model, the app’s creators claim it was developed for under $6 million—a fraction of the billions spent by competitors. However, these claims have been met with skepticism from others in the AI industry.
The app’s emergence coincides with US restrictions on exporting advanced AI chip technology to China. In response, Chinese developers have collaborated, sharing resources and exploring innovative approaches to AI development. This has led to models requiring significantly less computing power and lower costs, potentially disrupting the industry’s status quo.
Earlier this month, DeepSeek released its R1 model, boasting performance comparable to OpenAI’s advanced models in tasks such as mathematics, coding, and natural language processing. Silicon Valley venture capitalist and former Trump advisor Marc Andreessen likened the moment to "AI’s Sputnik moment," referencing the Soviet Union’s surprise 1957 satellite launch that caught the US off-guard.
DeepSeek’s rapid ascent has rattled global markets. Dutch chip equipment maker ASML saw its shares fall over 10%, while Germany’s Siemens Energy—a producer of AI-related hardware—experienced a 21% drop.
“This low-cost Chinese alternative wasn’t on anyone’s radar, so it’s blindsided the market,” said Fiona Cincotta, senior market analyst at City Index. “If these affordable AI models gain traction, it could severely impact the profitability of rivals, especially those who’ve invested heavily in costly AI infrastructure.”
Vey-Sern Ling, a Singapore-based technology equity advisor, warned the BBC that DeepSeek “could potentially derail the investment case for the entire AI supply chain.”
However, analysts at Citi argued that while DeepSeek might challenge the dominance of US firms like OpenAI, China’s development could face hurdles. “In an increasingly restrictive environment, US access to advanced chips remains a significant advantage,” they noted.
Meanwhile, US tech firms and foreign investors have announced The Stargate Project, a $500 billion AI infrastructure initiative based in Texas.
The Story Behind DeepSeek
Founded in 2023 by Liang Wenfeng in Hangzhou, China, DeepSeek is the brainchild of the 40-year-old information and electronic engineering graduate. Liang also established the hedge fund that financed the app’s development.
Reportedly, Liang stockpiled Nvidia A100 chips, which are now banned for export to China, amassing up to 50,000 units. By pairing these chips with more affordable, importable ones, he successfully launched DeepSeek.
Liang was recently seen meeting with Chinese Premier Li Qiang alongside other industry leaders. In a 2024 interview with The China Academy, he expressed surprise at the reaction to the earlier version of his model.
“We didn’t expect pricing to become such a sensitive issue,” Liang said. “We were simply working at our own pace, calculating costs, and pricing accordingly.”
DeepSeek’s rise underscores the evolving global AI landscape, with cost-efficient innovation emerging as a powerful contender to established players.
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