The rise of DeepSeek, a Chinese artificial intelligence (AI) app, has caused a significant stir in the tech industry, as it surged to the top of Apple’s App Store, surpassing established competitors like ChatGPT. The app’s popularity has triggered a selloff of shares in major tech firms, including Nvidia, Microsoft, and Meta, with European stocks also experiencing a decline.
DeepSeek’s rapid ascent has raised eyebrows across the industry, challenging the belief that the U.S. holds an unchallenged lead in AI technology. The app is powered by the DeepSeek-V3 model, which researchers claim was developed for less than $6 million—significantly lower than the billions spent by rival companies. However, some in the AI community have questioned the validity of these claims.
The app’s success comes as the U.S. has imposed restrictions on the sale of advanced chip technology to China, a move that has spurred Chinese AI developers to innovate by sharing resources and exploring alternative approaches. As a result, AI models have become more cost-efficient and require less computing power, potentially disrupting the industry’s economic structure.
Following the launch of DeepSeek-R1 earlier this month, the company claimed its performance rivaled that of OpenAI’s latest models, particularly in tasks like math, coding, and natural language processing. Marc Andreessen, a Silicon Valley venture capitalist and advisor to former President Donald Trump, compared the rise of DeepSeek to the Soviet Union’s launch of Sputnik, suggesting that the U.S. has once again been caught off guard by a technological competitor.
The app’s surge has rattled markets, with companies like ASML, a Dutch chip equipment maker, and Siemens Energy, a manufacturer of AI-related hardware, seeing significant drops in share prices. Fiona Cincotta, senior market analyst at City Index, pointed out that the introduction of a low-cost Chinese AI model has taken many by surprise, raising concerns about the profitability of established rivals.
Vey-Sern Ling, a technology equity advisor based in Singapore, warned that DeepSeek’s success could undermine the entire AI supply chain investment case. However, analysts at Citi noted that the challenges faced by Chinese companies, such as the ongoing chip restrictions, could hinder DeepSeek’s long-term development.
Despite the potential disruptions, DeepSeek’s founder, Liang Wenfeng, remains confident in his company’s direction. The 40-year-old, who founded the company in 2023 in Hangzhou, has been an influential figure in the Chinese tech scene. He reportedly built a large stockpile of Nvidia A100 chips, which were later banned for export to China, and combined them with less advanced chips still available for import. Liang’s innovative approach has caught the attention of both industry experts and Chinese government officials.
As DeepSeek continues to challenge U.S. tech giants, the global AI landscape is expected to undergo significant shifts in the coming years.
