What is DeepSeek?
DeepSeek is a cutting-edge AI model developed by a Chinese startup, designed as a competitive alternative to leading AI systems like OpenAI’s GPT-4 and Meta’s Llama. It has outperformed these models in several third-party benchmarks while maintaining a significantly lower development cost—around $6 million compared to billions spent by its U.S. counterparts. This affordability challenges the long-held assumption that significant financial investments are necessary to lead in AI innovation.
The emergence of DeepSeek has raised concerns among American tech leaders about China’s rapid advancements in AI, particularly as it showcases efficiency in developing high-performance models using less expensive technology. This development has geopolitical implications, with fears that the U.S. might lose its dominance in AI, a critical field for both technological and economic leadership
Tech stocks, particularly in the U.S., have seen declines following the announcement of DeepSeek’s capabilities. Investors are concerned that U.S. companies may need to reassess their strategies, potentially incurring higher costs to remain competitive. This reaction underscores the broader industry disruption caused by the rapid rise of affordable, high-performing Chinese AI models.
What features does the DeepSeek app offer?
DeepSeek is a Chinese artificial intelligence company founded in Hangzhou in July 2023. It gained attention for its AI assistant app, which was released in the United States on January 10, 2025. The company has been recognized for its advanced AI capabilities and cost-efficient development strategies.
Who is Liang Wenfeng, the founder of DeepSeek?
Liang Wenfeng, the founder of DeepSeek, is a graduate in information and electronic engineering. He partially funded the company using profits from a hedge fund he launched. Notably, Liang reportedly accumulated a significant stockpile of Nvidia A100 chips—estimated at around 50,000—before their export to China was restricted. This hardware, combined with more affordable lower-end chips, enabled the development of DeepSeek’s cutting-edge AI models. Liang was recently seen at a meeting between industry leaders and Chinese Premier Li Qiang, highlighting his prominent role in China’s AI landscape
DeepSeek’s AI app has become widely accessible and is available for download through Apple’s App Store and its official website. It is free to use, which has contributed to its rapid rise as the top-downloaded app on Apple’s store in the U.S. Despite this popularity, some users have reported difficulties signing up for the service.
The app functions similarly to ChatGPT, offering a highly capable AI assistant designed to answer user queries and improve productivity. User reviews have praised its conversational ability, stating that it “gives the writing more personality.” However, the app avoids politically sensitive topics, such as the Tiananmen Square incident of June 4, 1989, with responses like, “I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses”
Why is DeepSeek impacting American companies like Nvidia?
DeepSeek has significantly impacted American companies like Nvidia due to its ability to develop competitive AI models at a fraction of the cost. While U.S. companies like Nvidia rely on advanced and expensive semiconductor chips, DeepSeek has successfully used less powerful and more cost-effective chips, challenging the belief that high-end hardware is essential for AI innovation.
This development caused a major sell-off in the tech sector on January 27, 2025, leading the Nasdaq to drop over 3%. Nvidia, the leading maker of AI chips, experienced the largest loss, with its market value plummeting by $600 billion in a single day—a historic one-day drop for any U.S. company. Nvidia’s stock price fell 17%, causing its market capitalization to shrink from $3.5 trillion to $2.9 trillion, pushing it to third place behind Apple and Microsoft
The rise of cost-efficient alternatives like DeepSeek has created uncertainty about the future demand for high-performance chips, which have traditionally been a cornerstone of AI development. This shift may force U.S. companies to reevaluate their strategies to stay competitive in a rapidly changing AI landscape.
