Chinese AI startup DeepSeek says it was hit with 'large-scale malicious attacks'

Chinese technology startup DeepSeek said on Monday that it was hit by “large-scale malicious attacks” that hindered its ability to onboard new users.

The DeepSeek has made a large language model (LLM), ‘R1’, similar to ChatGPT that has rattled the Western tech ecosystem. The R1 just as well as ChatGPT and others but has been developed at a fraction of the cost that went into making OpenAI’s ChatGPT — DeepSeek says R1 has been made with just $5.6 million compared to hundreds of millions and billions spent by the likes of Open AI, Meta, and Google on their models.

There are concerns in the West that R1 could overtake Western models over its cost-effectiveness and edge in generative artificial intelligence (AI).

Western tech stocks fell on Monday as a result of R1-induced frenzy. Chipmaker Nvidia, whose chips are central to AI applications, lost nearly $600 million in value on Monday, and tech-heavy Nasdaq fell by 3.1 per cent and the broader index S&P 500 fell 1.5 per cent. Other tech companies too, such as Meta, Alphabet, and Oracle, and chipmakers like Marvell, Broadcom, Micron, and TSMC also fell sharply.

The DeepSeek R1 has posed a grave threat to Western companies that now appear to be losing long-held edge in the domain of AI. In the broader industrial competition between the United States-led Western world and China, it was the technological prowess of the West that had long given West the edge, but that now stands challenged. Keith Lerner, analyst at Truist, told CNN that DeepSeek’s success would drive investors’ attention towards other Chinese companies as well and that could further affect Western businesses.

“The bottom line is the US outperformance has been driven by tech and the lead that US companies have in AI. The DeepSeek model rollout is leading investors to question the lead that US companies have and how much is being spent and whether that spending will lead to profits (or overspending)…

Separately, Charu Chanana, the Chief Investment Strategist at Saxo, told CNN that DeekSeek’s success could “spark renewed investor interest in undervalued Chinese AI companies, providing an alternative growth story”.