DeepSeek shakes the AI industry

A Chinese artificial intelligence company called DeepSeek has sent shockwaves through the technology industry, after claims that it built a powerful AI model at a fraction of the cost spent by American rivals.

On 27 January, shares in the American chip maker Nvidia fell by 17 per cent, wiping around $590 billion off its value, the largest one-day loss for any company in stock market history.

What is DeepSeek?

DeepSeek is a small company based in Hangzhou, founded in 2023 by Liang Wenfeng, who also runs a hedge fund. Its latest model, called R1, was released on 20 January and performs as well as leading American models on some tests of reasoning, maths and coding.

The company's chatbot app rose to the top of the Apple App Store in the United States and Britain, overtaking ChatGPT.

Why the shock?

DeepSeek says it trained an earlier model, on which R1 is based, for less than $6 million in computing costs, using fewer and less powerful chips than American companies. Leading American firms have spent billions of dollars on the huge data centres needed to train their models.

Some experts have questioned the figures, saying they may not include the full cost of research and equipment. But the model's performance has led investors to question whether such enormous spending is necessary.

The United States restricts the export of the most advanced AI chips to China, and DeepSeek's success suggests Chinese companies are finding ways to work around those limits.

Open to all

DeepSeek has made its model freely available for others to download and adapt, unlike many American companies, which keep their most advanced models closed.

Concerns

Some governments and companies have raised concerns about data privacy, as the app stores users' information on servers in China. Users have also found that it avoids questions on subjects that are sensitive in China.

Reaction

President Donald Trump described the launch as a wake-up call for American industry. Sam Altman, the head of OpenAI, called the model impressive.

The shock comes days after Trump announced Stargate, a plan by several companies to invest up to $500 billion in AI infrastructure in the United States.