A Chinese AI startup called DeepSeek has taken the tech world by storm, causing major market disruption after releasing an AI model that rivals industry leaders like OpenAI's ChatGPT - and at a fraction of the cost.
DeepSeek's latest AI model, known as R1, has demonstrated performance comparable to top U.S. competitors while reportedly costing only $5.6 million to develop. This stands in stark contrast to estimates that similar AI models typically cost between $100 million to $1 billion to build.
The company's rapid rise has sent shockwaves through Wall Street. On Monday, tech stocks took a significant hit, with Nvidia experiencing the largest single-day market value loss in stock market history at $600 billion. The tech-heavy Nasdaq index dropped 3%, while other major AI players like Microsoft and Meta saw their shares decline.
Founded in July 2023 by Chinese entrepreneur Liang Wenfeng, DeepSeek has quickly gained traction. Its mobile app reached the top spot on Apple's App Store across multiple countries, including the U.S., U.K., and Australia, with 1.6 million downloads reported as of last weekend.
The company's success stems from its innovative approach to AI development. DeepSeek uses "inference-time computing," activating only the most relevant portions of its model for each query, resulting in reduced computational power and costs.
Industry experts have praised DeepSeek's achievements. Marc Andreessen, a prominent tech investor, called it "one of the most amazing and impressive breakthroughs" he's seen. Even Microsoft CEO Satya Nadella acknowledged the technology as "super impressive" during the World Economic Forum in Davos.
However, some analysts remain skeptical about DeepSeek's reported development costs and its potential adoption by major U.S. businesses. Questions also linger about whether the company used restricted American-made AI chips in its development process.
The emergence of DeepSeek has sparked renewed discussion about the global AI race, particularly between the U.S. and China. With U.S. export controls limiting semiconductor sales to Chinese companies, DeepSeek's success challenges assumptions about the resources needed to develop competitive AI models.
As the tech industry grapples with this new player, DeepSeek's impact extends beyond market valuations - it's forcing a reassessment of AI development costs and efficiency, potentially reshaping the future of artificial intelligence innovation.