DeepSeek, a Chinese AI app, has quickly become a game-changer in the AI space. It has overtaken ChatGPT to become the most popular free app on Apple’s App Store in the US, UK, and China. Since its launch in January, DeepSeek has challenged the idea that the US leads in AI innovation.
Low-Cost Development and Global Success
What sets DeepSeek apart is its cost-effective approach. Powered by the open-source DeepSeek-V3 model, the app reportedly cost less than $6 million to develop. This is far less than the billions spent by competitors. DeepSeek claims its low-cost model represents a significant breakthrough in AI development. However, some experts have questioned these claims.
The recent unveiling of DeepSeek-R1, its new model, has fueled its rise. The model excels in tasks such as coding, math, and natural language reasoning. Venture capitalist Marc Andreessen, a former advisor to President Donald Trump, called it “AI’s Sputnik moment.” He compared it to the Soviet Union’s 1957 satellite launch, which shocked the world.
Challenges and Implications for the AI Industry
DeepSeek’s success ties into China’s growing AI development, spurred by US-imposed restrictions on advanced chip sales to China since 2021. These restrictions have driven Chinese developers to create AI models that require less computing power and are cheaper to produce. DeepSeek’s low-cost model now poses a threat to US-based companies like Nvidia, Microsoft, and Meta, which have seen stock prices drop in response.
Fiona Cincotta, a senior market analyst, warned that if DeepSeek’s model gains widespread adoption, it could hurt competitors heavily invested in expensive infrastructure. Singapore-based tech advisor Vey-Sern Ling cautioned that DeepSeek’s success could challenge the entire AI supply chain investment case. However, Citi analysts remain confident that US companies hold an edge due to their access to advanced chips.
Founder and Visionary Behind DeepSeek
DeepSeek was founded in 2023 by Liang Wenfeng, an engineering graduate from Hangzhou, China. Liang, who also founded the hedge fund that financed DeepSeek, stockpiled Nvidia A100 chips—now banned for export to China. He paired them with cheaper, lower-end chips to build his AI systems. Liang’s influence was further highlighted when he met Chinese Premier Li Qiang in 2024.
In a recent interview, Liang expressed surprise at the global reaction to DeepSeek’s pricing. He said, “We didn’t anticipate pricing would be such a sensitive topic. We simply calculated costs and set prices accordingly.” With its low-cost, high-performing AI, DeepSeek has disrupted the global AI industry, challenging traditional investment models.
A Shifting Competitive Landscape
DeepSeek’s rise signals a major shift in the global AI industry. By offering a high-performing AI model at a fraction of the cost of competitors, it highlights the need for more cost-efficient approaches in AI development. As DeepSeek continues to gain traction, the competitive landscape may evolve, with significant implications for both established players and emerging innovators.
