DeepSeek: How a Chinese AI Company is Disrupting Global Stock Markets

A Chinese tech startup, DeepSeek, has stirred up stock markets and discussions about AI competition between the US and China. Their AI chatbot became the top free app on Apple's iPhone store, sparking interest as a competitor to ChatGPT. This development raises questions about the cost-effectiveness of US tech companies' investments in AI infrastructure.

Some US tech analysts are concerned that DeepSeek's progress might indicate that Chinese companies are catching up with American firms in generative AI. This could challenge the significant investments US companies plan for data centres and chips. However, there is also confusion due to hype around DeepSeek's technology. "The models they built are fantastic, but they aren't miracles either," said Stacy Rasgon, a Bernstein analyst.

DeepSeek's Background and Achievements

Founded in 2023 in Hangzhou, China, DeepSeek released its first large language model the same year. CEO Liang Wenfeng, who co-founded High-Flyer hedge fund, leads the company. DeepSeek gained attention by launching an AI model comparable to those from US firms like OpenAI but more cost-effective with Nvidia chips.

The chatbot's availability on Apple and Google stores increased its reach. A research paper published last week highlighted another model, R1, showcasing advanced reasoning skills at a lower cost than OpenAI's similar model. "What their economics look like, I have no idea," Rasgon noted, adding that pricing surprised many.

US-China AI Competition

The situation has sparked debates in the US about competing with China in AI. Venture capitalist Marc Andreessen called DeepSeek R1 "AI's Sputnik moment," likening it to the 1957 satellite launch that ignited a space race between the Soviet Union and the US. Andreessen cautioned against over-regulating AI in the US.

DeepSeek's rise challenges US foreign policy efforts to limit AI semiconductor sales to China. Gregory Allen from the Center for Strategic and International Studies suggested that DeepSeek's timing might be politically motivated. He compared it to Huawei's phone release during diplomatic talks on export controls.

Nvidia's stock fell 18% amid these developments. Despite this, Nvidia praised DeepSeek's work as "an excellent AI advancement" using "widely-available models and compute that is fully export control compliant." This highlights ongoing tensions in the global AI landscape as both nations vie for technological leadership.