DeepSeek’s AI assistant, developed at a fraction of the cost of its rivals and using less computing power, threatens to upset the technology world order
In technology markets, disruption can happen anytime and emerge from any corner. When it does happen, even the well-entrenched market leaders can potentially face existential threats overnight. American technology giants are now realising this the hard way. Chinese startup, DeepSeek, is creating waves in the artificial intelligence (AI) sector with its cost-effective AI models set to challenge the US tech dominance. DeepSeek’s AI assistant, developed at a fraction of the cost of its rivals and using less computing power, is threatening to upset the technology world order. Backed by a hedge fund in China, DeepSeek’s open-source R1 model has massively disrupted the global market, sent shockwaves through Silicon Valley and has come to redefine the industry’s cost and efficiency models. Its open-source AI assistant, launched last week, has already become the top free app on the Apple App Store, surpassing ChatGPT. The development is aptly described by some experts as the ‘Sputnik moment’, referring to the Soviet satellite that triggered the space race. While not many details are available in the public domain regarding the Chinese AI lab which has developed hits chatbot model, it has seemingly leapfrogged the likes of OpenAI, Google and Meta in the high-stakes AI arms race. The open-source, reasoning model has been said to outperform the tech industry’s leading AI models, such as OpenAI’s o1, on key math and reasoning benchmarks. The impact on the global markets was almost instant. US tech giant Nvidia lost over a sixth of its value after the surging popularity of the Chinese chatbot.
This has raised doubts about the reasoning behind some American tech companies’ decision to pledge billions of dollars in AI investment. While ChatGPT-maker OpenAI has been haemorrhaging money — spending $5 billion last year alone — DeepSeek’s developers say it built this latest model for a mere $5.6 million. That is a tiny fraction of the cost that AI giants like OpenAI, Google and Anthropic have relied on to develop their models. DeepSeek has not only given Western AI giants a run for their money but also sparked fears that the US may struggle to maintain its AI primacy in the face of a brewing tech cold war with China. Nvidia and other tech firms connected to AI, including Microsoft and Google, saw their values take a sharp dip. DeepSeek’s emergence comes as the US is restricting the sale of the advanced chip technology that powers AI to China. Forced to continue their work without steady supplies of imported advanced chips, Chinese AI developers have experimented with new approaches to the technology. This has resulted in AI models that require far less computing power than before. It also means that they cost a lot less, which has the potential to upend the industry.
