DeepSeek, a Chinese AI app, has surpassed ChatGPT to become the number one app on Apple’s App Store in the UK, US, and China. This marks a significant achievement for the app, positioning it as a strong competitor in the global AI market.
Disrupting the AI Market with a Low-Cost Model
Launched in January, DeepSeek is challenging the dominance of American AI companies. The app is powered by the DeepSeek-V3 model, which was developed for less than $6 million, a fraction of the billions spent by major players like OpenAI.
Experts, however, question the accuracy of these cost claims. The app’s latest model, DeepSeek-R1, is being compared to OpenAI’s advanced models for tasks like math, coding, and language reasoning. Silicon Valley investor Marc Andreessen called it “AI’s Sputnik moment,” likening it to the Soviet Union’s launch of the first artificial satellite in 1957.
DeepSeek’s rapid rise reflects innovation by Chinese developers, who have adapted to restrictions on advanced chip imports. By sharing research and creating efficient AI models, they’ve reduced computing requirements and costs, possibly reshaping the industry.
Impact on AI Investments
DeepSeek’s success has sent shockwaves through the AI investment landscape. Shares of companies like Nvidia, Microsoft, and Meta dropped on Monday. European companies like ASML and Siemens Energy saw even sharper declines.
Fiona Cincotta, a senior analyst at City Index, noted, “This low-cost Chinese model wasn’t on the market’s radar, so it caught many by surprise.” She added that DeepSeek’s rise raises concerns about the profitability of rivals who have invested heavily in AI infrastructure.
Vey-Sern Ling, a technology advisor, warned that DeepSeek could disrupt the entire AI supply chain. Still, Citi cautioned that access to advanced chips might keep American companies ahead.
The Vision Behind DeepSeek
DeepSeek was founded in 2023 by Liang Wenfeng, a graduate of information and electronic engineering from Hangzhou, China. Liang also founded a hedge fund that backed the company.
To make DeepSeek’s launch possible, Liang combined expensive Nvidia A100 chips, which are now banned from export to China, with cheaper alternatives. He managed to accumulate up to 50,000 of these chips before restrictions were enforced.
Liang’s cost-effective approach has kept DeepSeek competitive while maintaining strong performance. In July 2024, he reflected on the pricing strategy, saying, “We simply calculated costs and set prices accordingly.”
Liang’s strategic thinking and support from the Chinese government, as seen in his meeting with Premier Li Qiang, continue to shape the company’s future.