In a significant move last week, Chinese startup DeepSeek introduced a free DeepSeek AI company assistant that consumes less data and operates at a fraction of the cost of competing services. By Monday, the assistant had surpassed US rival ChatGPT in downloads on the Apple App Store.
US stocks experienced a historic decline on January 27, with Nvidia shares plummeting nearly 17%, erasing a record $600 billion in market value in just one day. The drop came amid concerns that DeepSeek, a low-cost AI model from China, could challenge the dominance of established AI leaders like Nvidia, triggering a sell-off in tech stocks across Wall Street.
Here are the 10 key points to know about DeepSeek:
What is DeepSeek?
DeepSeek (DS), owned entirely by the AI-driven quantitative fund High-Flyer in China, has captured global attention. The company revealed that training its DeepSeek-V3 AI model cost less than $6 million using Nvidia H800 chips. DeepSeek’s AI Assistant, powered by DeepSeek-V3, has now overtaken ChatGPT in downloads on the US Apple App Store, becoming the top-rated free app.
Who Created DeepSeek?
DeepSeek is a startup based in Hangzhou, China, founded by Liang Wenfeng, co-founder of the quantitative hedge fund High-Flyer. In March 2023, High-Flyer shifted focus to creating an independent research group to explore Artificial General Intelligence (AGI), leading to the establishment of DeepSeek later that year. The exact investment from High-Flyer in DeepSeek remains unclear, but the fund owns patents related to chip clusters for training AI models.
Why is DeepSeek Causing a Market Rout?
On January 27, tech stocks worldwide plummeted as the rapid rise of DeepSeek, a low-cost Chinese AI model, raised concerns about the demand for high-tech chips. DeepSeek’s free AI assistant, which uses cheaper chips and less data, challenges the assumption that AI growth will drive demand for expensive chips and data centers. This has sparked fears of potential price wars in AI and raised doubts about the competitiveness of US tech giants.
Implications on Computing Power Demand
Investors are now questioning the sustainability of AI’s massive investments in computing power. Despite Nvidia’s projected $200 billion GPU investment in 2024, there has been little return on these investments. DeepSeek’s success may force AI companies, especially in the US, to justify their growing capital expenditures on AI in the coming years.
Implications for Smartphones
If DeepSeek’s smaller AI models prove successful, it could positively impact the smartphone market. However, Jefferies has expressed doubts about AI smartphones, noting that AI has yet to gain significant traction with consumers. Running larger AI models on smartphones would require more hardware upgrades, raising costs and potentially limiting the appeal of AI-powered phones.
Bright Future for Chinese AI Market?
If DeepSeek’s advanced training techniques, such as multi-head latent attention (MHA) and mixture of experts (MOE), gain widespread adoption, UBS predicts a bright future for AI. Lower costs could accelerate AI adoption and bring artificial general intelligence (AGI) closer. UBS suggests that investors should adjust their portfolios to favor AI applications (25-30%) and intelligence layers (15-20%) over the enabling layer (50-60%).
Cyberattack Hits DeepSeek Website
DeepSeek faced a cyberattack on Monday, leading the company to temporarily limit new registrations. This attack followed the surge in popularity of its AI assistant, which became the top-rated free app on the US Apple App Store. The company also experienced website outages, with users unable to log in. DeepSeek resolved the issues related to its API, marking its longest outage in 90 days.
Performance of AI Stocks
On Monday, NASDAQ futures dropped 3%, with Nvidia suffering a historic $593 billion market value loss—the largest one-day loss for any company on Wall Street. Nvidia’s stock fell nearly 17%, dragging down other tech giants. Broadcom Inc. saw a 17.4% decline, Microsoft (ChatGPT’s backer) dropped 2.1%, and Google parent Alphabet ended the day down 4.2%.
US President Donald Trump on DeepSeek
US President Donald Trump commented on DeepSeek’s rise, stating that the Chinese startup’s innovative AI technology should serve as a wake-up call for American companies. Trump praised the cost-effective and faster AI methods developed by Chinese firms, emphasizing the need for the US to focus on competing in the global AI race. He considered DeepSeek’s advancements a positive development, as they show that AI innovation can be achieved without excessive spending.
DeepSeek’s rise in the AI space is reshaping global tech markets. As a low-cost, high-performance alternative to established models, it offers significant implications for AI development. Protect your innovations with expert patent and trademark services. Consult a senior IP lawyer for intellectual property registration today.
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