DeepSeek AI Sends Shockwaves Through US Tech Industry
US President Donald Trump has described the rapid rise of Chinese tech company DeepSeek as “a wake-up call” for America’s tech sector. The launch of its AI model, R1, has shaken Wall Street, causing sharp drops in major tech stocks.
Nvidia, one of the biggest players in the AI chip industry, saw its market value plummet by nearly $600 billion (£482 billion). This dramatic shift highlights growing concerns about China’s advancements in artificial intelligence.
DeepSeek: Cutting AI Costs Dramatically
The industry was stunned by DeepSeek’s claim that its R1 model was developed at a fraction of the cost compared to its competitors. While US companies invest billions, DeepSeek reportedly spent just $6 million (£4.2 million) on training its AI model.
The affordability of this model is raising critical questions about the future of US dominance in the AI space. Experts suggest this could reshape global investment strategies in artificial intelligence.
Trump’s Response to DeepSeek’s Rise
Speaking aboard Air Force One, Trump offered a mixed response. He suggested that the development could be “a positive” for the US if it encourages more cost-effective innovation.
“If you could do it cheaper, if you could do it [for] less [and] get to the same end result, I think that’s a good thing for us,” he stated. Despite the breakthrough, Trump reassured reporters that the US would maintain its dominant position in AI.
DeepSeek: Revolutionizing AI Development
DeepSeek’s technology runs on the open-source DeepSeek-V3 model, which the company claims requires significantly fewer resources. Their AI reportedly uses just 2,000 specialized chips for training, compared to an estimated 16,000 needed for leading US models.
This breakthrough comes amid the US government’s restrictions on exporting advanced chip technology to China. To counteract this, Chinese AI developers have innovated with new approaches, enabling cost-effective and resource-efficient AI models.
Who Founded DeepSeek?
DeepSeek was founded in 2023 by Liang Wenfeng, an information and electronic engineering graduate from Hangzhou, China. Liang also heads a hedge fund that supports the company.
In a recent interview, Liang mentioned that DeepSeek had not anticipated the global reaction to its affordable pricing. “We were simply following our pace, calculating costs, and setting prices accordingly,” he explained.
Global Impact on Tech Stocks
The launch of DeepSeek-R1 has had a ripple effect across global markets. On Tuesday, shares in Japanese AI-related firms like Advantest, SoftBank, and Tokyo Electron fell sharply, causing Japan’s Nikkei 225 index to decline by 1.4%.
Several Asian markets remain closed for the Lunar New Year, and mainland China’s financial markets are set to reopen on 5 February.
Praise and Doubts Surround DeepSeek
DeepSeek’s R1 model has received praise from industry leaders, including OpenAI CEO Sam Altman, who acknowledged the model’s impressive capabilities given its cost. However, he added, “OpenAI will obviously deliver much better models moving forward.”
Despite this praise, doubts linger. Critics, including Elon Musk, have questioned DeepSeek’s claims, suggesting the company may have access to a much larger pool of resources, including banned Nvidia chips.
Game-Changer for AI Adoption
Experts believe the lower costs of DeepSeek’s AI could accelerate global adoption of artificial intelligence. Marina Zhang, an associate professor focusing on China’s high-tech industries, noted, “DeepSeek’s ability to rival US models despite limited access to advanced hardware shows the power of software ingenuity and data efficiency.”
Ion Stoica, co-founder of Databricks, added, “This cost reduction can expand the market faster and increase its overall value.”
What Lies Ahead?
DeepSeek’s advancements highlight a shift in the global AI landscape. With innovative strategies and affordable solutions, the company has positioned itself as a key player in the ongoing AI revolution, raising critical questions about the future of AI investments, innovation, and global dominance.
