On January 27, US stock markets experienced an unprecedented downturn, with Nvidia’s shares plummeting nearly 17%, erasing almost $600 billion in market value. This dramatic shift was triggered by growing concerns that DeepSeek, a low-cost Chinese AI startup, could challenge the dominance of industry giants like Nvidia.
DeepSeek recently launched a free AI assistant that uses less data and operates at a fraction of the cost compared to existing AI services. According to reports, by January 27, the assistant had surpassed US competitor ChatGPT in terms of downloads on Apple’s App Store.
Here are the 10 key things to know about DeepSeek:
1. What is DeepSeek? DeepSeek (DS) is a Chinese AI startup owned by High-Flyer, a quant fund. The company has gained significant attention after revealing that training DeepSeek-V3 cost less than $6 million in Nvidia H800 chips. Their AI Assistant, powered by DeepSeek-V3, recently surpassed ChatGPT as the most downloaded free app on the US App Store.
2. Who created DeepSeek? Based in Hangzhou, DeepSeek is controlled by Liang Wenfeng, co-founder of High-Flyer. In March 2023, High-Flyer announced its shift from trading to focusing on building AI technologies, particularly Artificial General Intelligence (AGI), and DeepSeek was founded later that year. Details on the fund’s investment in DeepSeek remain unclear.
3. Why is DeepSeek causing market upheaval? The rise of DeepSeek has shaken global tech stocks. Its AI assistant, which uses cheaper chips and less data, threatens the established market belief that AI’s growth would fuel high demand for advanced chips, especially from companies like Nvidia. Concerns have emerged over AI price wars and their impact on major US tech firms.
4. What does this mean for computing power demand? Investors are now questioning the viability of AI-related investments, particularly in GPUs, which have seen massive spending with minimal returns. DeepSeek’s success with lower-cost models has raised doubts about the future profitability of high-capex AI ventures.
5. Will there be implications for smartphones? DeepSeek’s low-cost models could have a positive effect on smartphones, which have struggled to adopt AI effectively. If smaller models become more viable, they may make AI more accessible for mobile devices, potentially reducing the need for costly hardware upgrades.
6. Does this signal a bright future for the Chinese AI market? If DeepSeek’s training methods and model architecture gain traction, analysts predict a bright future for the AI industry. UBS suggests that lower costs could speed up AI adoption, bringing AGI closer than expected. This could also shift investment strategies toward AI applications and intelligence layers.
7. Cyberattack Hits DeepSeek Website DeepSeek faced a cyberattack on January 27 after its AI assistant gained massive popularity. The attack led to temporary registration limits and outages on its website, marking the company’s longest downtime in 90 days.
8. How are AI stocks performing? The stock market saw significant losses as Nvidia’s market value dropped by $593 billion, marking the largest one-day loss in Wall Street history. Other tech giants, including Broadcom, Microsoft, and Alphabet, also saw declines, highlighting the broader impact of DeepSeek’s rise.
9. US President Donald Trump’s Take on DeepSeek Former US President Donald Trump praised DeepSeek’s affordable AI technology, suggesting it should motivate American companies to innovate and compete more effectively. He expressed support for the advancements made by Chinese firms, including DeepSeek, as they offer a cost-effective alternative to expensive AI solutions.
10. Sam Altman’s Response to DeepSeek OpenAI CEO Sam Altman acknowledged DeepSeek’s AI model, DeepSeek-R1, as “impressive,” despite the disruption it caused in the global market. He expressed excitement about the competition and reaffirmed OpenAI’s commitment to delivering even more advanced models in the future.
As DeepSeek continues to challenge AI giants, it’s clear that the landscape of artificial intelligence is rapidly evolving, with implications for businesses and investors worldwide.
