The DeepSeek AI breakthrough has shaken up the tech world, with the company claiming to have developed its AI model at a fraction of the cost of its competitors. U.S. President Donald Trump referred to the rise of the Chinese firm as “a wake-up call” for America’s technology industry after the groundbreaking AI model sent shockwaves through Wall Street.
DeepSeek AI breakthrough: Disruption in the Tech Sector
Tech giants like Nvidia saw their shares plummet, with the chip maker losing nearly $600 billion (£482 billion) in market value. DeepSeek’s R1 model, allegedly built far cheaper than its rivals, raises concerns about US dominance in AI and the sustainability of large-scale investments in the field.
Within a week of launch, DeepSeek became the most downloaded free app in the US. Despite the impact, Trump viewed the development as a potential benefit for the US, saying, “If you can achieve the same results for less, that’s good for us.” He downplayed any long-term threat, reaffirming America’s position as a global leader in AI.
Rising Concerns Over Cybersecurity and Data
DeepSeek’s success has sparked cybersecurity concerns in some nations. Australian science minister Ed Husic urged caution, emphasizing the need to address issues like data privacy and consumer trust.
Powered by the open-source DeepSeek-V3 model, the company claims its breakthrough AI cost about $6 million (£4.2 million) to train, significantly less than the billions spent by competitors. However, these claims remain disputed by critics in the field.
The US has restricted advanced chip sales to China, forcing Chinese developers to share resources and adopt innovative approaches. This has led to AI models requiring fewer computing resources and significantly reducing costs. Experts suggest these advancements could reshape the industry.
The market reaction has been mixed. While the Nasdaq index rebounded slightly after initial losses, Japanese AI-related stocks dropped sharply, dragging the Nikkei 225 index down by 1.4%. Many Asian markets remained closed for the Lunar New Year holiday.
Who Founded DeepSeek?
DeepSeek was established in 2023 by Liang Wenfeng in Hangzhou, southeastern China. The 40-year-old engineering graduate also founded the hedge fund that backed the company. Liang recently met Chinese Premier Li Qiang and reflected on his model’s pricing controversy in a 2024 interview. He stated, “We didn’t expect pricing to become such a sensitive topic.”
DeepSeek claims its R1 model matches OpenAI’s performance for tasks like coding, math, and natural language processing. OpenAI CEO Sam Altman acknowledged the achievement, calling the model impressive for its price but maintaining confidence in OpenAI’s superiority.
Experts view DeepSeek’s success as proof of software innovation overcoming hardware limitations. Marina Zhang, a professor at the University of Technology Sydney, highlighted the ingenuity behind DeepSeek’s data efficiency. Ion Stoica, chair of Databricks, believes lower costs could accelerate AI adoption, expanding the market’s value.
However, skeptics remain. Tech mogul Elon Musk questioned claims that DeepSeek relies on limited hardware. In response to speculation about their resources, Musk remarked, “Obviously,” suggesting doubts about the company’s transparency.
DeepSeek’s rise is a reminder of AI’s transformative potential, signaling shifts in global tech competition.