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Published on
January 27, 2025
4 min read
Chinese AI Model DeepSeek Overtakes ChatGPT, Sparks Turmoil in US Tech Market
Chinese AI startup DeepSeek has overtaken ChatGPT as the most preferred free app on the Apple App Store in the US. The popularity of the AI app has surged among US users since its January 10 release.
According to Reuters, the AI assistant is powered by the DeepSeek-V3 model. Developers of this model say it ranks high on the open-source model leaderboard, rivaling many closed-source advanced models globally.
Panic in Big Techs
Meta Platforms is among the US big techs that has panicked following the release and popularity of DeepSeek. The generative AI division in the big tech company is reportedly in panic mode following DeepSeek’s popularity.
“Engineers are moving frantically to dissect DeepSeek and copy anything and everything we can from it. I’m not even exaggerating. The management is worried about justifying the massive cost of gen AI. How would they face the leadership when every single ‘leader’ of gen AI org is making more than what it cost to train DeepSeek v3 entirely, and we have dozens of such ‘leaders’,” an employee wrote.
Tech experts believe that DeepSeek’s cost-effective option provides an alternative to current AI development challenges and poses a big threat to US big tech dominance in the AI space. According to Nigel Green, CEO of deVere Group, DeepSeek is escalating the AI race while disrupting the tech landscape globally.
“The launch of this innovation underscores a historic pivot in the balance of technological power. China’s technological advances, particularly in AI, are eroding the US ability to use tariffs as a tool to maintain global supremacy. This is not just about a single company; it represents a larger trend that will redefine the global economic landscape. This is the clearest signal yet of where the future is heading,” Green said.
Yann LeCun, Meta’s Chief AI Scientist acknowledged DeepSeek’s popularity. However, he argued it reflection of the power of open source models and should not be considered a threat
“Open source models are surpassing proprietary ones. DeepSeek has profited from open research and open source. They came up with new ideas and built them on top of other people’s work. Because their work is published and open source, everyone can profit from it. That is the power of open research and open source,” he said.
Nvidia AI Chips
AI models need advanced chips to power training tasks. The Biden administration increased bans to prevent export of advanced chips to China. Despite this ban, developers of DeepSeek-V3 model claimed that they used Nvidia H800 chips for training.
While this detail has been disputed, it has challenged the widely held belief about the supremacy of US AI technology. It has also raised questions about the effectiveness of Washington’s decision to introduce export controls to keep China from accessing US AI chips and capabilities.
But aWall Street’s Citi Bank says the issues facing Chinese companies could block DeepSeek’s development despite its ability to challenge American AI companies like OpenAI. Last week, US tech firms and investors launched the Stargate Project, a joint venture that is investing $500 billion in AI infrastructure in Texas.
Big Impact
The uptake of DeepSeek AI assistant in the US has had a big impact on the US tech industry and the US stock market. On January 27, popularity of the Chinese AI startup sparked a stock selloff in leading tech firms, causing shares for companies such as Microsoft, Nvidia, and Meta to plummet ahead of market opening.
Shares of Dutch chip equipment manufacturer, ASML dipped by more than 10% while those of Siemens Energy, which makes AI hardware dropped by 21%.
“This idea of a low-cost Chinese version hasn’t necessarily been at the forefront, so it’s taken the market a little bit by surprise. 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,” City Index Senior Analyst Fiona Cincotta said.
DeepSeek’s R1 model surpasses other AI platforms in several ways and costs much less to develop and train. Researchers who developed the ChatGPT competitor have claimed they spent less than $6 million on its development compared to billions spent by its rivals. This claim has been challenged by others in AI space.
