DeepSeek Chinese AI chatbot sparks market turmoil for rivals
Shares of major U.S. technology companies fell after a surge in low-cost chatbots built by Chinese artificial intelligence (AI) companies.
The DeepSeek app, which launched last week, has surpassed competitors including Openai’s Chatgpt to become the most downloaded free app in the United States.
U.S. tech giants including AI chipmaker Nvidia, Microsoft and Meta all saw their share prices fall on Monday.
China’s chatbots are reportedly being developed at a fraction of the cost of their rivals, raising questions about the future dominance of U.S. AI and the scale of investment U.S. companies are planning.
Last week, Openai joined a group of other companies pledging to invest $500m (£400m) in building AI infrastructure in the US.
In first announcement since returning to office, President Donald Trump Calling it “the largest AI infrastructure project in history” This will help keep “the future of technology” in America.
DeepSeek is powered by the open-source DeepSeek-V3 model, which its researchers claim was developed for around $6 million, which is significantly less than the billions spent by competitors.
However, this assertion has been disputed by others in AI.
The researchers said they used already existing technology as well as open source code – software that can be used, modified or distributed for free.
DeepSeek emerged as the United States restricted sales of advanced chip technology that will power AI in China.
To keep working without a steady supply of imported high-end chips, Chinese AI developers shared their work with each other and tried new technological approaches.
This results in AI models requiring much less computing power than before.
It also means they cost far less than previously thought, which has the potential to disrupt entire industries.
After launching DeepSeek-R1 earlier this month, the company touted one of its “latest models with Openai” for tasks such as math, coding and natural language reasoning.
Silicon Valley venture capitalist and Trump adviser Marc Andreessen described DeepSeek-R1 as “AI’s breakout moment,” referring to the satellite launched by the Soviet Union in 1957.
At the time, the United States was believed to have been caught off guard by the technological achievements of their competitors.
DeepSeek’s sudden popularity has stunned stock markets in Europe and the United States.
Dutch chip equipment maker ASML saw its share price fall by more than 10%, while shares of Siemens Energy AG dropped 21% in AI-related hardware.
Fiona Cincotta, senior market analyst at City Index, said: “The idea of a low-cost version was not necessarily at the forefront, so it surprised the market a little bit.”
“So if you suddenly have access to this low-cost AI model, then that raises concerns about competitors’ profits, especially given the amount of more expensive AI infrastructure they’ve already invested in.”
Singapore-based technology equity adviser Vey-Sern Ling told the BBC it could “risk derailing the investment case for the entire AI supply chain”.
But Wall Street banking giant Citi said that while DeepSeek could challenge the dominance of U.S. companies such as OpenAI, problems faced by Chinese companies could hamper its development.
“We estimate that U.S. access to more advanced chips is an advantage in an inevitably restrictive environment,” analysts said in a note.
The company was founded in 2023 by Liang Wenfeng in the southeastern Chinese city of Hangzhou.
The 40-year-old information and electronic engineering graduate also founded a hedge fund backing DeepSeek.
he It is said A store was built for Nvidia A100 chips, now banned from exporting to China. The expert believes that by pairing these chips with cheaper, lower-end chips, a series estimated at 50,000, he launched DeepSeek.
Mr Liang was seen at a recent meeting between industry experts and Chinese Prime Minister Li Qiang.
In an interview in July 2024 Chinese AcademyMr Liang said he was surprised by the response to previous versions of the AI model.
“We didn’t expect pricing to be a sensitive issue,” he said.
“We just follow our own pace, calculate the costs and set the price accordingly.”
Additional reporting by Joao da Silva and Dearbail Jordan.
