 "What is DeepSeek, the Chinese AI firm that caused $1 trillion rout on Wall Street?")
Everyone agrees that Artificial Intelligence (AI) is the future.
But this week, the future may have changed inexorably.
This is because a little-known Chinese AI firm may have completely changed the game.
The latest AI model from DeepSeek has sent shockwaves through Silicon Valley and Wall Street.
But what do we know about DeepSeek? Why has it caused such a stir in the US market?
Let’s take a closer look:
What do we know?
According to Fortune, DeepSeek was founded as an AI firm in May 2023.
Its creator Liang Wenfeng, set it up in Hangzhou in southeastern China.
Liang, 40, graduated in information and electronic engineering from Zhejiang University.
He also set up a quantitative hedge fund known as High-Flyer in 2015.
Economic Times quoted Liang as saying he switched over to AI out of ‘scientific curiosity.’
“Basic science research rarely offers high returns on investment,” he added.
As per BBC, Liang is said to have launched DeepSeek by collecting 50,000 of Nvida A100 chips.
The US has since banned these chips from being exported to China.
DeepSeek is believed to have combined these chips with cheaper, lower-end sets.
According to Economic Times, DeepSeek mostly hires young people from prestigious Chinese universities.
“Our core technical positions are mostly filled by people who graduated this year or in the past one or two years,” Liang said.
He claimed this leads to a collaborative culture which helps solve difficult challenges.
He said his hires are on a mission to make China a world leader in Artificial Intelligence.
As per Fortune, DeepSeek took the plunge into AI by putting out DeepSeek Coder in November 2023.
It then followed up with its DeepSeek LLM and DeepSeek V-2 in May 2024.
The low cost of the AI model and its strong performance raised eyebrows in China – and caused other AI companies to lower their prices to compete.
Its latest models R1 and V-3 have taken the world by storm.
Why has it caused an uproar in US?
People were shocked about how little money DeepSeek seemingly spent on its AI models.
Its researchers have claimed that they spent under $6 million (Rs 51 crore) on the DeepSeek V-3 launched on January 10.
That’s a fraction of what tech companies such as Apple and Microsoft spend on their AI models.
Its creators also say DeepSeek’s AI Assistant, powered by the DeepSeek-V3 model “tops the leaderboard among open-source models and rivals the most advanced closed-source models globally."
Basically, the creators claim that DeepSeek’s performance compares favourably with AI models from giants like OpenAI when it comes to maths, coding and natural language reasoning.
These accomplishments are made even more impressive by the fact that this comes in the backdrop of the US imposing a ban on advanced chips to China.
“The problem we are facing has never been funding, but the export control on advanced chips,” Liang was quoted as saying by Economic Times.
Indeed DeepSeek researchers H800 chips from Nvidia – which are far from top of the line and were initially developed to bypass restrictions on sales to China – to train their AI models.
Experts say if DeepSeek, if its performance and price point for its model can be verified, has dealt a huge blow to major AI companies.
“DeepSeek represents a new wave of Chinese companies focused on long-term innovation over short-term gains,” a tech analyst told Wired.
“This idea of a low cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,” Fiona Cincotta, senior market analyst at City Index, told BBC.
“So if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure.”
Singapore-based technology equity advisor Vey-Sern Ling added that DeepSeek could “potentially derail the investment case for the entire AI supply chain.”
“We still don’t know the details and nothing has been 100% confirmed in regards to the claims, but if there truly has been a breakthrough in the cost to train models from $100 million+ to this alleged $6 million number this is actually very positive for productivity and AI end users as cost is obviously much lower meaning lower cost of access,” Jon Withaar, a senior portfolio manager at Pictet Asset Management, said.
Havoc on Wall Street
Bloomberg reported that news about DeepSeek’s achievements caused US and European tech stocks to lose $1 trillion.
Futures on the Nasdaq 100 slid almost four per cent suggesting the index could see its biggest daily slide since September 2022 later on Monday, if those losses are sustained.
Those on the S&P 500 dropped two per cent.
Shares in AI chipmaker Nvidia fell more than 11 per cent, rival Oracle dropped 8.5 per cent and AI data analytics company Palantir lost 6.5 per cent in pre-market trading.
In Europe, ASML, which counts Taiwan’s TSMC, Intel, and Samsung as its customers, dropped almost 7.5 per cent.
Siemens Energy lost nearly 18 per cent.
In Japan, startup investor SoftBank Group slid more than 8 per cent.
Wall Street Investors are now asking themselves if the Western AI companies have been massively overspending all this time – and whether it was even necessary.
The US, for example, last week announced the $500 billion Stargate Project on AI.
The DeepSeek product “is deeply problematic for the thesis that the significant capital expenditure and operating expenses that Silicon Valley has incurred is the most appropriate way to approach the AI trend,’ Nirgunan Tiruchelvam, head of consumer and internet at Singapore-based Aletheia Capital told Fortune. “It calls into question the massive resources that have been dedicated to AI.”
“While current leaders like Nvidia have a strong foothold, it is a reminder that AI dominance cannot be taken for granted,” added Charu Chanana, chief investment strategist at Saxo Markets. “The emergence of China’s DeepSeek indicates that competition is intensifying, and although it may not pose a significant threat now, future competitors will evolve faster and challenge the established companies more quickly. Earnings this week will be a huge test.”
Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore said the market was questioning the capex spend of the major tech companies.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management said: “The idea that the most cutting-edge technologies in America, like Nvidia and ChatGPT, are the most superior globally, there’s concern that this perspective might start to change.”
“I think it might be a bit premature,” Ichikawa added.
Marc Andreessen, the Silicon Valley venture capitalist, said in a post on X on Sunday that DeepSeek’s R1 model was AI’s “Sputnik moment.”
Andreessen was referring to the former Soviet Union’s launch of a satellite that marked the start of the space race in the late 1950s.
“Deepseek R1 is one of the most amazing and impressive breakthroughs I’ve ever seen — and as open source, a profound gift to the world,” he said in a separate post.
Liang in July said he was taken aback by the response to his AI model.
“We didn’t expect pricing to be such a sensitive issue,” he said. “We were simply following our own pace, calculating costs, and setting prices accordingly.”
Liang was recently spotted at a meeting between industry experts and the Chinese premier Li Qiang, as per BBC.
By Monday, DeepSeek had taken US rival ChatGPT’s place as the top spot in Apple’s app store.
Whatever happens next, 2025 could be a massive year for AI.
With inputs from agencies
 "Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?")
 "As Russia pushes east, Ukraine faces mounting pressure to defend its heartland")
 "Why Mossad was not on board with Israel’s strike on Hamas in Qatar")
 "Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe")
 "Russian drones over Poland: Trump’s tepid reaction a wake-up call for Nato?")
 "As Russia pushes east, Ukraine faces mounting pressure to defend its heartland")
 "Why Mossad was not on board with Israel’s strike on Hamas in Qatar")
 "Turkey: Erdogan's police arrest opposition mayor Hasan Mutlu, dozens officials in corruption probe")
