A Chinese-made artificial intelligence (AI) model called DeepSeek has surged to the top of Apple Store’s downloads, surprising investors and causing significant losses for some tech stocks.
DeepSeek, a little-known Chinese startup, has sent shockwaves through the global tech world with the release of an artificial intelligence (AI) model whose capabilities rival the creations of Google and OpenAI.
Experts have advised caution in the swift adoption of the Chinese artificial intelligence platform DeepSeek, raising concerns about potential misinformation and the risk of user data being exploited by the People’s Republic of China (PRC) government.
The low-cost AI caused a $1 trillion drop in the leading U.S. tech stock index this week and quickly became the most downloaded free app.
DeepSeek’s rapid rise has startled the tech industry, demonstrating performance reportedly comparable to widely used platforms like ChatGPT – but at a significantly lower cost.
Released on January 20 2025, the AI model initially impressed AI enthusiasts before capturing global attention. Even US President Donald Trump acknowledged its impact, calling it a “wake-up call” for American companies to prioritize AI competition.
What Makes DeepSeek Different?
DeepSeek’s biggest advantage is its cost-efficient design. Unlike leading models like OpenAI’s, DeepSeek claims to operate on a fraction of the cost because it requires fewer advanced chips.
This innovation sent chip-making giant Nvidia’s stock plummeting, wiping out nearly $600 billion (£482bn) in market value—the largest single-day loss in US history.
Geopolitical Implications of DeepSeek
DeepSeek’s success raises questions about Washington’s efforts to curb China’s technological rise. One of the key US restrictions has been a ban on exporting advanced chips to China.
Despite these efforts, China remains determined, with President Xi Jinping declaring AI a national priority. Startups like DeepSeek are pivotal in China’s shift from traditional manufacturing to advanced technology industries like AI, chips, and electric vehicles.
Understanding Artificial Intelligence
What is AI?
AI allows computers to learn and solve problems, often by processing vast amounts of data and recognizing patterns.
Modern AI models, like ChatGPT and DeepSeek, use generative AI techniques to create human-like conversations and generate new content based on existing information.
Everyday AI Applications
Millions of people use AI tools for tasks such as:
- Writing emails
- Summarizing text
- Answering questions
- Assisting with coding and studying
However, AI models have limitations. They can generate falsehoods and may reflect biases from their training data.
What is DeepSeek?
A Chatbot Similar to ChatGPT
DeepSeek is a free AI-powered chatbot that functions similarly to ChatGPT. While its performance compared to rivals is still debated, its underlying AI model—R1—is the largest open-source large language model yet, boasting 670 billion parameters.
R1 reportedly matches OpenAI’s O1 model in mathematics, coding, and reasoning. Its reasoning-based approach enables it to process responses incrementally while using less memory, reducing overall costs.
Security and Censorship Concerns
Many have expressed reservations about the Chinese company and its handling of users’ data. Michael Wooldridge, a professor of the foundations of AI at Oxford University, told the Guardian that it was not unreasonable to assume data inputted into the chatbot could be shared with the Chinese state:
“I think it’s fine to download it and ask it about the performance of Liverpool football club or chat about the history of the Roman empire, but would I recommend putting anything sensitive or personal or private on them? “Absolutely not … Because you don’t know where the data goes.” Michael Wooldridge
Australia’s science minister Ed Husic has expressed concerns over data privacy and security, saying:
“There are a lot of questions that will need to be answered in time on quality, consumer preferences, data, and privacy management.” Ed Husic
Like other Chinese AI models—such as Baidu’s Ernie and ByteDance’s Doubao—DeepSeek avoids politically sensitive questions.
For example, when asked about the Tiananmen Square incident, DeepSeek responded:
“I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses.”
While censorship is a challenge for China’s global AI ambitions, DeepSeek appears to balance accurate training data with an added layer of content moderation.
Cost-Efficient AI Development
DeepSeek’s team claims to have built it for just $6 million (£4.8m)—a fraction of the $100+ million estimated cost of OpenAI’s ChatGPT-4.
Reports suggest that DeepSeek’s founder stockpiled Nvidia A100 chips, which have been banned from US exports to China since September 2022. By combining these with cheaper, less advanced chips, DeepSeek created a powerful model at a lower cost.
Who is Behind DeepSeek?
Meet Liang Wenfeng
DeepSeek was founded in December 2023 by Liang Wenfeng, a graduate of Zhejiang University with degrees in electronic engineering and computer science.
Unlike many Silicon Valley AI leaders, Liang comes from a finance background. He is also the CEO of High-Flyer, a hedge fund that leverages AI for quantitative trading.
China’s Growing AI Ambition
Liang has long believed China should lead in AI innovation rather than follow US advancements. In a rare interview, he stated:
“If the US can develop its quantitative trading sector, why not China?”
Reflecting DeepSeek’s growing influence, Liang was recently seen at a meeting hosted by China’s Premier Li Qiang.
In an interview with Chinese media outlet Waves in 2023, Liang dismissed the suggestion that it was too late for startups to get involved in AI or that it should be considered prohibitively costly.
“Reproduction alone is relatively cheap — based on public papers and open-source code, minimal times of training, or even fine-tuning, suffices. Research, however, involves extensive experiments, comparisons, and higher computational and talent demands,” Liang
Impact on US Tech Companies
DeepSeek’s success challenges the assumption that only massive budgets and top-tier chips can drive AI innovation.
Meanwhile, OpenAI, valued at $157 billion, now faces pressure to justify its high valuation and massive spending.
Stock Market Reaction
On January 27, DeepSeek’s emergence rattled financial markets, causing the Nasdaq to fall by over 3%.
The biggest casualty was Nvidia, which saw its stock price plummet 17%, causing it to fall from the most valuable company in the world to third place behind Apple and Microsoft.
China Celebrates DeepSeek’s Rise
A Major Victory for Chinese Tech, DeepSeek’s success is a significant win for China, reinforcing its push toward technological self-sufficiency.
Although the Communist Party has yet to comment, state media has boasted that DeepSeek is shaking Silicon Valley and Wall Street.
DeepSeek and People’s Republic of China (PRC)
DeepSeek is based in Hangzhou and makes clear in its privacy policy that the personal information it collects from users is held “on secure servers located in the People’s Republic of China”.
It says it uses data to “comply with our legal obligations, or as necessary to perform tasks in the public interest, or to protect the vital interests of our users and other people”.
China’s national intelligence law states that all enterprises, organizations and citizens “shall support, assist and cooperate with national intelligence efforts”.
Source: https://www.linkedin.com/pulse/warning-deepseek-chinese-ai-model-disrupting-nqgoe/
