A Chinese artificial intelligence (AI) app, *DeepSeek*, has become the top-rated free app on the Apple App Store in the US, UK and China, beating out rivals including ChatGPT.
Its rise in popularity has led to a sell-off in US-based AI-related companies. Shares of Nvidia, Microsoft and Meta fell on Monday morning, with European stocks also falling.
The app has been wildly popular since its launch, challenging the widespread belief that the US is the leader in AI and raising questions about the scale of investment US companies are making in AI.
Its researchers say the open-source model, DeepSeek-V3, cost less than $6 million to develop, compared to the billions of dollars spent by competing companies.
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But this claim has been disputed by others in the AI space.
DeepSeek’s sudden rise comes as the United States restricts the sale of high-tech chips needed for AI to China.
To keep up with their work without a steady supply of high-tech imported chips, Chinese AI developers are experimenting with new ways to share their work and improve the technology.
As a result, AI models now require less computing power than previously thought and cost much less than expected. This could turn the entire industry upside down.
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After launching DeepSeek-R1 earlier this month, the company said its model outperformed the latest model from ChatGPT makers OpenAI, especially on tasks like math, parsing, and language reasoning.
``Marc Andreessen, a Silicon Valley investor and advisor to Donald Trump, has called DeepSeek-R1 the "Sputnik moment of artificial intelligence," a reference to the Soviet Union's 1957 launch of the Sputnik satellite, which marked a major turning point in the space race.``
At the time, the United States was considered vulnerable to its rival's technological advances.
DeepSeek's popularity has shocked the market. Shares in Dutch chipmaker ASML fell more than 10%, while shares in Siemens Energy, which makes artificial intelligence hardware, fell 21%.
> Fiona Cincotta, senior market analyst at City Index, said: "The idea of a low-cost Chinese app has surprised the market because it was not expected. * "
She said: "If low-cost AI models are acquired, it will cause concerns about the profitability of rivals, especially since they have already spent a lot of money on expensive AI systems."
Wei-Sern Ling, a Singapore-based technology consultant, told the BBC that this could "destroy investment in the entire AI supply chain."
But Wall Street banking giant Citi warned that while DeepSeek could challenge leading US companies like OpenAI, the problems facing Chinese companies could hinder their development.
“We estimate tha in an inevitably more restrictive environment, the US’s access to more advanced chips is an advantage,” the analysts said in a report.
Last week, a group of US technology companies and foreign investors announced The Stargate Project, announcing a $500 billion investment in the Texas-based AI company’s infrastructure.
Who founded DeepSeek?
The company was founded in 2023 by Liang Wenfeng in Hangzhou, southeast China.
The 40-year-old, a graduate of information and electronics engineering, also founded the hedge fund that backs DeepSeek.
He reportedly has a stash of Nvidia A100 chips, which are currently banned from being exported to China. Experts believe the collection could be as many as 50,000. They believe that combining these chips with cheaper chips that could still be imported may have helped him launch DeepSeek.
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