China's DeepSeek AI Has Shaken The US Tech Industry

Uploaded on 2025-01-28 in TECHNOLOGY-Key Areas-Artificial Intelligence, NEWS-Cybersecurity News, INTELLIGENCE-Hot Spots-China, FREE TO VIEW

The new Chinese AI app DeepSeek has shaken the technology industry and confidence in US superiority in the field of Artificial Intelligence (AI) has been significantly changed.

Newly-elected Donald Trump has praised China's AI breakthrough as a "wake-up call" for American tech firms that ultimately "could be good" for the US.

DeepSeek's creator says its R1 model was developed using less advanced, and fewer, computer chips than those employed by tech giants in the United States.

DeepSeek was the most downloaded free app on Apple's US App Store recently, and the imcat of DeepSeek's AI chatbot has started a massive sell-off of the major technolgy firm's shares as investors fears have mounted over US leadership in the sector. Shares of AI chip designer Nvidia have dropped 17 and it lost nearly $600bn in market value which is the biggest drop in the history of the US stock market.

This extraordinary change can be simply attributed to its much lower cost and DeepSeek's developers have prompted serious questions for Silicon Valley.

While ChatGPT-maker OpenAI has been spending $5bn in 2024 DeepSeek's developers say it built this latest model for a mere $5.6m. That is a tiny fraction of the cost that AI giants like OpenAI, Google, and Anthropic have relied on to develop their own models.

Technology industry observers, investors, and analysts are disoriented - some wondered if this signalled a short-term a buying opportunity, while others questioned the information DeepSeek was providing.

The sudden emergence of a small Chinese startup capable of rivalling Silicon Valley’s top players has challenged assumptions about US dominance in AI and raised fears that the unprecedented high market valuations of companies such as Nvidia, Alphabet and Meta may be detached from reality.

DeepSeek was founded in late 2023 by Liang Wenfeng, a serial entrepreneur who also runs a hedge fund. Unknown outside China, Liang has a history of combining growing technologies and investing and 2013 he co-founded an investment firm that used AI to implement trading strategies. DeepSeek, which has an open-source development model, was developed as a side-project.

Hampered by restrictions on the supply of power-hungry high-powered AI semiconductor chips to China, DeepSeek has focused on the use of lower level, significantly less expensive and easier to obtain chips, which can be manufactured in China.

This development will be a big test for the Silicon Valley's vaunted AI technology leadership, characterised by enormous capital investment in infrastructure, like the recently announced $500billion Stargate Project. Their response will have major consequences for the US economy.

Image: @deepseek_ai

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