- Recently, the DeepSeek app has become one of the most downloaded apps on the App Store in several countries.
- DeepSeek is a generative AI service that competes with ChatGPT, but it comes from a Chinese company that claims it’s cheaper to run operationally.
- The rise of DeepSeek has stirred considerable debate in the tech and investment sectors, challenging the American dominance in the field.
At the end of last week, the Chinese company DeepSeek introduced the latest version of its large language model, which experts believe rivals the latest models from OpenAI and Meta, but with a key distinction: the new model is much more affordable. The company stated that it took two months to develop the model and cost under $6 million, whereas Western models take years and cost billions of dollars to build.
This news caused a massive shock to the American tech markets, and it immediately impacted tech stock prices. Nvidia, for example, saw a staggering $300 billion drop in market value— the largest loss of its kind— before recovering some of that value.
At the same time as the announcement, the DeepSeek app topped download charts worldwide, becoming the most downloaded app in countries including the U.S., U.K., China, and the UAE. Many users appear to be flocking to it because it provides similar performance to OpenAI’s latest models but, unlike ChatGPT, it doesn’t require a paid subscription. What’s remarkable about DeepSeek’s model is that it matches the performance of the latest models from OpenAI and Meta, but the Chinese company behind it claims it cost far less to develop and required much less processing power and fewer GPUs than the Western competitors.
Another notable feature of the new model is that it is open-source, meaning anyone can access, inspect, and contribute to it. This opens the door for rapid adoption by the developer community and could turn it into a foundation for building future models.
If the Chinese company’s claims are accurate, the impact on global tech markets could be immense, especially in the U.S. The new model challenges the American dominance that companies like Meta and OpenAI have established and, with its significantly lower cost, raises questions about the huge (often tens of billions) expenses involved in developing Western AI models.
One industry particularly affected by the announcement is the semiconductor sector, especially companies leading the AI chip market. Both Nvidia, a major player in AI chips, and ASML, the Dutch company that manufactures the advanced machines needed to make high-performance chips, saw substantial losses in market value after the news broke. If the Chinese company’s claims are true, demand for AI chips could plummet, putting Nvidia—which heavily relied on the AI chip market—in a precarious position. Meanwhile, ASML’s stock dropped by 9%, as it is the sole producer of extreme ultraviolet (EUV) lithography machines, essential for producing the powerful chips used in smartphones, computers, and AI servers.
In summary, this announcement and its consequences could have far-reaching effects on the global AI landscape. It marks the debut of a non-American first-tier AI model. Since the model is open-source and available for further development, it could quickly overshadow current models and make the AI space more competitive. This would result in OpenAI losing some of the exceptional attention it garnered, which boosted its valuation to $157 billion in its most recent investment round.
