The sudden rise of the Chinese artificial intelligence (AI) app DeepSeek has sent shockwaves through global tech markets, triggering a selloff in major companies like Nvidia, Microsoft, and Meta. This app, which has overtaken competitors like ChatGPT to become the top-rated free app on Apple’s App Store, has challenged the long-standing perception of U.S. dominance in AI innovation.
DeepSeek’s ascent has unsettled investors worldwide, with European markets also feeling the impact. Share prices for tech-related companies such as ASML and Siemens Energy have dropped significantly, falling by over 10% and 21%, respectively. Analysts attribute the upheaval to the app’s low-cost development model, which undermines the assumption that cutting-edge AI requires massive financial investment.
“This idea of a low-cost Chinese version hasn’t been at the forefront, so it’s taken the market by surprise,” explained Fiona Cincotta, a senior market analyst at City Index, in an interview with the BBC.
A Low-Cost AI Revolution
DeepSeek’s innovative approach has raised serious questions about the future profitability of U.S. tech giants that have spent billions on AI infrastructure. The app runs on the open-source DeepSeek-V3 model, which researchers claim was developed for less than $6 million—a fraction of what its competitors have spent.
Though some skepticism remains in the AI community, DeepSeek has proven that high-performance models can be created with lower costs and reduced computing power. The recently launched DeepSeek-R1 version has been hailed for matching OpenAI’s advanced models in tasks such as math, coding, and natural language processing.
Silicon Valley venture capitalist Marc Andreessen has described the app’s emergence as “AI’s Sputnik moment,” likening it to the Soviet Union’s surprise launch of the first satellite in 1957.
Navigating U.S. Export Restrictions
DeepSeek’s success comes despite strict U.S. export controls on advanced chips and technology to China. These restrictions, aimed at limiting China’s access to AI resources, have not deterred the company’s progress.
Reports indicate that DeepSeek has relied on Nvidia A100 chips, which are now banned for export to China, as well as cheaper, lower-end chips still accessible under U.S. regulations. Founder Liang Wenfeng, a 40-year-old graduate in information and electronic engineering, allegedly stockpiled 50,000 Nvidia A100 chips to drive the company’s AI advancements.
The rise of DeepSeek has prompted U.S. tech firms and foreign investors to launch the Stargate Project, a $500 billion initiative to strengthen AI infrastructure in Texas. This move reflects growing concerns about maintaining a competitive edge in the global AI landscape.
While DeepSeek’s rise has sparked fears about U.S. AI dominance, Wall Street analysts caution against exaggerating its long-term impact. According to a report from Citi, U.S. firms still benefit from access to more advanced chips and resources, which continue to give them an advantage in an increasingly restricted environment.
The Founder Behind DeepSeek
DeepSeek was founded in 2023 by Liang Wenfeng in Hangzhou, southeastern China. Liang, who also runs a hedge fund that initially funded the app’s development, is known for his pragmatic approach to innovation.
In a 2024 interview, Liang expressed surprise at the global reaction to DeepSeek’s rise. “We didn’t expect pricing to be such a sensitive issue,” he said. “We simply calculated costs and set prices accordingly.”
DeepSeek’s rapid success has reshaped perceptions of AI development, proving that smaller budgets and alternative strategies can yield powerful results. As the global AI race intensifies, the app’s emergence serves as both a wake-up call and a challenge to established tech giants.
Despite its disruptive potential, analysts emphasize that U.S. companies still hold key advantages in terms of resources and technology. Nonetheless, DeepSeek’s story underscores the growing role of innovation from unexpected players in shaping the future of AI.
Conclusion
DeepSeek’s breakthrough represents a turning point in the AI industry. Its ability to challenge established players with a cost-effective model has not only unsettled markets but also redefined what is possible in AI development. Whether this is a temporary disruption or a sign of deeper changes in global tech leadership remains to be seen, but one thing is clear: the AI landscape has changed forever.