Chaos has hit the Western tech sector amid the surprise emergence of the Chinese artificial intelligence app, DeepSeek.
The chatbot – which has overtaken ChatGPT as the top-rated free product on the Apple App Store in the US, UK, and China – is powered by the open-source DeepSeek-V3 model, which was supposedly developed for just $6M.
A New Giant in the Field?
Tech and AI stocks are now expected to be hit with futures trading pointing towards heavy falls in the United States when Wall Street today.
Nvidia, Microsoft, Oracle, and Meta shares were all down on Monday morning ahead of the opening of the US markets, reports say.
The sudden appearance of DeepSeek appears to threaten US dominance in the AI industry, especially if claims that it was developed for a fraction of the cost of rivals like ChatGPT are true.
The US government had strengthened restrictions on the sale of American-made advanced chips to China in 2021.
But this may have been a miscalculation, as it means that Chinese AI firms are now sharing their work more readily, resulting in artificial intelligence models that run on much less computing power.
The timing of DeepSeek’s launch last week is somewhat auspicious, with the financial results of Microsoft and Meta expected on Wednesday, and Apple’s expected on Thursday.
The Chinese startup says its product uses less data at a fraction of the cost of currently well-known models.
Reuters reported that shares in AI players tumbled across the world – from Tokyo to Amsterdam.
Senior portfolio manager at Pictet Asset Management, Jon Withaar, said: “We still don’t know the details and nothing has been 100% confirmed in regards to the claims. But if there truly has been a breakthrough in the cost to train models from $100M+ to this alleged $6M number, this is actually very positive for productivity and AI end users, as cost is obviously much lower meaning lower cost of access.”
Marc Andreessen, the Silicon Valley venture capitalist, described DeepSeek-R1 as “AI’s Sputnik moment“.
Summary
Chinese AI app DeepSeek was launched earlier this year amid claims that its DeepSeek-V3 model was developed for just $6M – a fraction of the cost of Western rival products.
It has now overtaken ChatGPT to become the top app on the Apple App Store in China, the US, and the UK, and shares in AI players across the world have tumbled amid the launch.