By David Yagudayev, Science and Technology Editor
An artificial intelligence startup called DeepSeek has sent shockwaves across the AI Industry and caused major U.S. technology stocks to fall. Released in January 2025, the free AI model was shown to perform as well as OpenAI’s ChatGPT, but at a fraction of the cost.
Developers at Deepseek claim that it cost them only $6 million to train the model, an insignificant sum compared to what OpenAI’s CEO Sam Altman said would take to develop a powerful AI technology comparable to GPT-4. DeepSeek has also open-sourced its models, making a cheaper-use AI model that reached number one in the App Store at breathtaking speed. This breakthrough has completely dismantled the notion that only very established and well-funded technology companies can develop advanced AI models.
DeepSeek’s founder, Liang Wenfeng, is also the CEO of a hedge fund called High-Flyer, and graduated from Zhejiang University with degrees in electronic information engineering and computer science. Liang has appeared in a few interviews stating that China’s AI industry cannot remain a follower of the U.S.’s AI development, and needs to innovate in the space on its own.
However, security concerns may hinder the growth of the Chinese model DeepSeek. Numerous countries such as the United States, Italy, Taiwan, Australia and South Korea have taken differing levels of action against DeepSeek, restricting its usage and citing potential national security concerns.
Immediately after DeepSeek’s release, NVIDIA, the leading supplier of AI chips, experienced an immense drop in its stock price. On January 27, 2025, NVIDIA’s stock price fell 17%, erasing approximately $600 billion from the market, which to date has been one of the largest single-day losses for a U.S. stock. This drastic decrease in stock price can be attributed to the uncertainty and major concerns of investors that DeepSeek’s and other future AI models may reduce demand for high-end AI chips produced and sold by NVIDIA.
However, NVIDIA’s stock has increased and at present has almost rebounded to its initial price. NVIDIA’s chips are still in high demand globally for AI infrastructure. Recently, the South Korean government purchased 10,000 GPUs for a national AI computing software, highlighting the GPU’s importance in various applications and sustained demand, despite the emerging competition internationally from various AI-model developers.
OpenAI will only face increased competition and concerns because of DeepSeek’s advancements. The new availability of comparably high-performance and cost-effective AI models from DeepSeek challenges OpenAI’s previous claims, market position and pricing strategies.
DeepSeek is not the only other big fish in the industry. Elon Musk, CEO of Tesla and founder of xAI, has claimed that its latest chatbot, Grok-3, outperforms both ChatGPT and DeepSeek. The competition is only growing and AI is developing at an exponential rate. Who knows what will happen in a few years time?
Photo Caption: DeepSeek
Photo Credit: Unsplash