Introduction: DeepSeek Overtakes ChatGPT
Last week, Chinese startup DeepSeek launched a free AI assistant that uses less data at a fraction of the cost of services like ChatGPT. By Monday, the app had already overtaken ChatGPT in downloads on the Apple App Store, signaling a major shift in the AI landscape.
The Market Impact of DeepSeek’s Rise
DeepSeek’s rapid rise has caused major turbulence in the stock market. On January 27, Nvidia’s shares dropped nearly 17%, erasing around $600 billion in market value. This drop is partly due to concerns that DeepSeek’s low-cost model might disrupt established AI leaders like Nvidia.
What is DeepSeek?
DeepSeek is fully owned by the AI-driven quant fund High-Flyer, based in China. Its latest version, DeepSeek-V3, has been praised for using less than $6 million worth of Nvidia H800 chips for training. The app’s success has catapulted it to the top of the US App Store, surpassing ChatGPT in downloads.
The Creation of DeepSeek
Founded in Hangzhou, DeepSeek is controlled by Liang Wenfeng, the co-founder of High-Flyer. The fund pivoted in March 2023, shifting focus to creating a new independent research group to explore Artificial General Intelligence (AGI). DeepSeek was born from this effort later that same year.
Why DeepSeek is Causing a Market Rout
The success of DeepSeek’s AI model, which uses lower-cost chips and less data, has shaken investor confidence in the future demand for high-end chips. There are growing fears of price wars within the AI space, which could undermine the profitability of major chipmakers like Nvidia.
Implications on the AI Sector
DeepSeek’s emergence raises difficult questions about the long-term sustainability of current AI investments. With the market growing more skeptical, many investors are questioning the viability of expensive AI computing power, especially in light of DeepSeek’s efficient and affordable model.
Impact on Smartphones
Interestingly, DeepSeek’s smaller models could have a positive impact on smartphones. However, experts are cautious, noting that AI-driven smartphones have yet to gain significant traction among consumers. Moreover, upgrading hardware to run more powerful models could lead to higher costs, which may deter widespread adoption.
Bright Outlook for Chinese AI Market
DeepSeek’s cost-effective approach to AI could accelerate the broader adoption of artificial intelligence. According to UBS, DeepSeek’s technology could potentially bring AGI closer to reality while lowering costs, which in turn would drive further innovation and adoption in the AI market, especially in China.
Cyberattack on DeepSeek’s Website
As DeepSeek’s popularity surged, the company was hit by a cyberattack that caused significant outages on its website. The startup temporarily restricted new registrations but has since resolved the technical issues, ensuring that users can continue to access the service.
AI Stocks Take a Hit
In the wake of DeepSeek’s success, US tech stocks took a significant hit. Nvidia suffered a staggering loss of $593 billion in market value, the largest one-day loss ever for a company on Wall Street. Other tech giants like Microsoft and Alphabet also saw declines.
Trump’s Thoughts on DeepSeek
Former US President Donald Trump weighed in on DeepSeek’s rapid success, praising the cheaper and faster AI technology coming from China. Trump emphasized that US industries must now focus on competing to keep up with China’s advances in AI technology, urging a renewed focus on innovation.
Sam Altman’s Take on DeepSeek
OpenAI CEO Sam Altman responded to DeepSeek’s rise, calling the new AI model “impressive” for its price point. While Altman acknowledged DeepSeek’s achievement, he emphasized that OpenAI would continue to focus on delivering even better models in the future, further solidifying its position in the AI race.
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- DeepSeek vs ChatGPT: China’s AI Model Disrupts Global Market - January 29, 2025
