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DeepSeek’s Rise Shakes AI Industry, Sends Shockwaves Through US Tech Sector
A new AI app from China, DeepSeek, has sent shockwaves through the tech industry, markets, and the prevailing belief in American dominance in artificial intelligence (AI). The app’s meteoric rise has raised questions about the future of the AI sector, as well as the cost-effectiveness of AI development.
Venture capitalist Marc Andreessen referred to the launch of DeepSeek as AI’s “Sputnik moment,” drawing comparisons to the Soviet Union’s launch of the Sputnik satellite, which triggered the space race. Over the weekend, DeepSeek became the most downloaded free app on Apple’s US App Store, and by Monday, it was already having a profound effect on the markets. The app’s launch sparked a massive sell-off of major tech stocks, including a 17% plunge in the share price of AI chipmaker Nvidia, which lost nearly $600 billion in market value — the largest drop in US stock market history, according to Bloomberg.
What has stunned Silicon Valley is the claim by DeepSeek’s developers that the app was built for just $5.6 million — a fraction of the billions spent by AI giants like OpenAI, Google, and Anthropic. While OpenAI spent $5 billion in 2023 alone, DeepSeek’s developers suggest that this low cost could signal a breakthrough in AI development, potentially disrupting the established industry.
In a growing sense of disbelief, many in the tech world have been left questioning DeepSeek’s viability and the accuracy of its financial claims. Some analysts have speculated that the app’s success could indicate a shift in how AI is developed and delivered, with lower costs and fewer resources than previously thought necessary. DeepSeek’s models reportedly use open-source software and existing technology, which has led some to speculate that its use of Nvidia’s H800 chips may have been facilitated by stockpiling during the past years.
The development has also spurred concerns about US dominance in the sector, as the country has long assumed its control over high-end chips and data centers gave it an advantage in the AI race. However, China’s sudden emergence as a serious player with DeepSeek has led many to reconsider the global balance of power in AI.
Billionaire Sam Altman of OpenAI, who has largely stayed quiet on the matter, did comment late on Monday, acknowledging DeepSeek’s “impressive” performance. While Altman reaffirmed OpenAI’s position as a leader in AI, he welcomed the competition, calling it invigorating.
DeepSeek’s arrival has left many observers unsure of what the future holds for US semiconductor giants and raised broader questions about the long-term implications of AI development. With this new development, China has flexed its muscles in the AI sector, making clear that the race for dominance is far from over, and the US may no longer have a clear upper hand.
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