DeepSeek AI App Shakes Up Tech Industry and Markets
SAN FRANCISCO — The speed at which the new Chinese AI app DeepSeek has shaken the technology industry, the markets and the bullish sense of American superiority in the field of artificial intelligence (AI) has been nothing short of stunning.
AI’s Sputnik Moment
Venture capitalist Marc Andreessen may have said it best. “DeepSeek-R1 is AI’s Sputnik moment,” he posted to X on Sunday, referring to the satellite that kicked off the space race.
Market Fallout
DeepSeek was the most downloaded free app on Apple’s US App Store over the weekend. By Monday, the new AI chatbot had triggered a massive sell-off of major tech stocks which were in freefall as fears mounted over America’s leadership in the sector.
Financial Impact
Shares of AI chip designer and recent Wall Street darling Nvidia, for example, had plunged by 17% by the time US markets closed on Monday. Or to put it in even starker terms, it lost nearly $600bn in market value which, according to Bloomberg, is the biggest drop in the history of the US stock market.
Cost Comparison
This extraordinary, historic spooking can largely be attributed to something as simple as cost. And a claim by DeepSeek’s developers that prompted serious questions in Silicon Valley.
While ChatGPT-maker OpenAI has been hemorrhaging money – spending $5bn last year alone – DeepSeek’s developers say it built this latest model for a mere $5.6m.
That is a tiny fraction of the cost that AI giants like OpenAI, Google, and Anthropic have relied on to develop their own models.
Industry Reaction
As this dramatic moment for the sector played out, there was a palpable silence in many corners of Silicon Valley when I contacted those who are usually happy to talk. Many observers, investors, and analysts appeared stunned.
Some wondered if this marked a buying opportunity. Others questioned the information DeepSeek was providing.
Uncertain Future
Regardless, DeepSeek’s sudden arrival is a “flex” by China and a “black eye for US tech,” to use his own words.
Trump’s words after the Chinese app’s sudden emergence in recent days were probably cold comfort to the likes of Altman and Ellison. He called this moment a “wake-up call” for the American tech industry, and said finding a way to do cheaper AI is ultimately a “good thing”.
Changing Landscape
It is also worth noting that it was not just tech stocks that took a beating on Monday. Energy stocks did too. DeepSeek’s arrival on the scene has upended many assumptions we have long held about what it takes to develop AI.
Maybe that nuclear renaissance – including firing up America’s Three Mile Island energy plant once again – won’t be needed. Maybe it does not take so much capital, compute, and power after all.
Conclusion
For now, the future of semiconductor giants like Nvidia remains unclear.
DeepSeek says its model was developed with existing technology along with open source software that can be used and shared by anybody for free.
But WIRED reports that for years, DeepSeek founder Liang Wenfung’s hedge fund High-Flyer has been stockpiling the chips that form the backbone of AI – known as GPUs, or graphics processing units.
The company has said its models deployed H800 chips made by Nvidia. US policy restricting sales of higher-powered chips to China might get a second-look under the new Trump administration.
OpenAI’s Sam Altman was mostly quiet on X Monday. But very late in the day, he wrote that DeepSeek was “impressive… particularly around what they’re able to deliver for the price”.
“We will obviously deliver much better models and also it’s legit invigorating to have a new competitor!” he wrote.
It was Sputnik that truly ushered in the space age. There, too, the US was caught off guard. How its tech sector responds to this apparent surprise from a Chinese company will be interesting – and it may have added serious fuel to the AI race. — BBC
