Chinese artificial intelligence startup DeepSeek’s AI Assistant dethroned ChatGPT to take the No. 1 spot on Apple App Store’s free app chart. The AI disruptor also rocked the stock market Monday, Jan. 27, while facing “large-scale malicious attacks” that forced it to limit users.
DeepSeek’s rise sunk Nvidia and other tech companies’ stock prices. Nvidia’s share price fell nearly 17% on Monday while the tech-heavy NASDAQ dropped 3%.
“I’m going by the papers they’re publishing, and it’s very impressive,” Microsoft CEO Satya Nadella told CNBC at the World Economic Forum in Davos, Switzerland. “So I think we should take the development out of China very, very seriously.”
What is DeepSeek?
Hedge fund manager Liang Wenfeng founded DeepSeek in 2023. The nascent AI lab gained a ton of attention this month after releasing its R1 model to rival OpenAI’s GPT o1 model. It’s already nearly as good as OpenAI, according to the Artificial Analysis Quality Index.
“What we found is that Deep Seek, which is the leading Chinese AI lab, their model is actually the top performing, or roughly on par with the best American model,” Scale AI CEO Alexandr Wang told CNBC last week.
DeepSeek’s R1 is open-source, meaning any AI developer can use it, modify it and enhance it. The company said it can learn and improve without human involvement. Users say it excels at chain-of-thought reasoning, a process involving breaking down a complicated task into logical steps.
Why did tech stocks dive?
U.S. tech companies have been pouring billions of dollars into AI development, but DeepSeek is reportedly breaking the internet on a budget.
According to the DeepSeek-V3 technical report released in December 2024, it took two months and less than $6 million to train this model using Nvidia’s H800 chips, which are modified to be exported to China.
However, not everyone believes exactly what they are reading in the technical report. Wang, whose company provides training data to AI companies, said DeepSeek’s parent company has around 50,000 Nvidia H100 chips, which are subject to export controls imposed by the U.S.
Back in 2022, the U.S. placed export controls on Nvidia to stop the company from selling its A100 and H100 chips to Chinese companies. These chips are used to develop AI models.
OpenAI CEO Sam Altman also questioned DeepSeek’s breakthroughs the day after the research paper was released.
it is (relatively) easy to copy something that you know works.
— Sam Altman (@sama) December 27, 2024
it is extremely hard to do something new, risky, and difficult when you don't know if it will work.
individual researchers rightly get a lot of glory for that when they do it! it's the coolest thing in the world.
“It is (relatively) easy to copy something that you know works,” he wrote in a post on X. “It is extremely hard to do something new, risky, and difficult when you don’t know if it will work. Individual researchers rightly get a lot of glory for that when they do it! It’s the coolest thing in the world.”
It’s unclear what type of future DeepSeek will have with export controls in place. But President Donald Trump is working with tech companies to boost AI in the U.S. He recently announced the $500 billion Stargate Initiative, a private sector deal with OpenAI, Softbank and Oracle. It’s expected to be the largest AI infrastructure project in history.
