DeepSeek: The Chinese AI app that has the world talking

DeepSeek, a new artificial intelligence (AI) application developed in China, has taken the world by storm, quickly rising to the top of the download charts on the Apple Store. Released on January 20, this innovative app has not only impressed AI experts but has also captured the attention of the entire tech industry and beyond. US President Donald Trump has referred to DeepSeek as a 'wake-up call' for American companies, urging them to focus on 'competing to win. ' What sets DeepSeek apart from its competitors is its claim of being developed at a significantly lower cost than leading AI models like OpenAI's, primarily due to its use of less advanced chips. This revelation has had a dramatic impact on the stock market, particularly affecting Nvidia, a major chip manufacturer, which saw its market value plummet by nearly $600 billion in a single day, marking the largest one-day loss in US history. The emergence of DeepSeek also raises important questions regarding the United States' efforts to curb China's technological advancements, especially considering the restrictions placed on the export of advanced chips to China. In response, China has doubled down on its commitment to AI, with President Xi Jinping declaring it a top priority. Start-ups like DeepSeek are essential as China shifts its focus from traditional manufacturing sectors, such as textiles and furniture, to advanced technologies, including chips, electric vehicles, and AI. So, what exactly is DeepSeek? DeepSeek is a free AI-powered chatbot that operates similarly to ChatGPT, another well-known AI tool. It is designed to assist users with a variety of tasks, although the extent of its effectiveness compared to its rivals is still a topic of debate. Reports suggest that DeepSeek is as capable as OpenAI's latest model, known as o1, particularly in areas such as mathematics and coding. Both o1 and DeepSeek are classified as 'reasoning' models, meaning they generate responses incrementally, mimicking the way humans think through problems and ideas. One of the advantages of DeepSeek is its lower memory usage, which ultimately reduces the cost of performing various tasks. However, like many other Chinese AI models, including Baidu's Ernie and ByteDance's Doubao, DeepSeek is programmed to avoid politically sensitive topics. For instance, when the BBC inquired about the events at Tiananmen Square on June 4, 1989, DeepSeek responded, 'I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses. ' This response highlights the significant challenge posed by Chinese government censorship to the international aspirations of its AI industry. Nevertheless, DeepSeek's foundational model appears to have been trained using reliable sources while incorporating a layer of censorship to filter out certain information. The creators of DeepSeek claim that they were able to train the AI for a mere $6 million, a fraction of the 'over $100 million' mentioned by OpenAI's CEO Sam Altman when discussing GPT-4. The founder of DeepSeek reportedly amassed a collection of Nvidia A100 chips, which have been banned from export to China since September 2022. Some experts believe that this stockpile, estimated to be around 50,000 chips, enabled him to develop such a powerful AI model by combining these advanced chips with cheaper, less sophisticated alternatives. On the same day that DeepSeek's AI assistant became the most downloaded free app on the Apple App Store in the US, the company faced 'large-scale malicious attacks,' prompting it to temporarily limit new registrations. Additionally, the app's website experienced outages on that day. DeepSeek was founded in December 2023 by Liang Wenfeng, who launched its first AI large language model the following year. Not much is known about Liang, who graduated from Zhejiang University with degrees in electronic information engineering and computer science, but he has recently gained international recognition. He was spotted at a meeting hosted by China's premier, Li Qiang, which reflects DeepSeek's growing significance in the AI sector. Unlike many American AI entrepreneurs who hail from Silicon Valley, Liang has a background in finance. He is the CEO of a hedge fund called High-Flyer, which utilizes AI to analyze financial data for investment decisions, a practice known as quantitative trading. In 2019, High-Flyer became the first quantitative hedge fund in China to raise over 100 billion yuan, equivalent to approximately $13 million. In a speech that year, Liang stated, 'If the US can develop its quantitative trading sector, why not China? ' In a rare interview last year, he expressed that China's AI industry 'cannot remain a follower forever. ' He elaborated, 'Often, we say there's a one or two-year gap between Chinese and American AI, but the real gap is between originality and imitation. If this doesn't change, China will always be a follower. ' When asked about the surprise surrounding DeepSeek's model in Silicon Valley, he remarked, 'Their surprise stems from seeing a Chinese company join their game as an innovator, not just a follower - which is what most Chinese firms are accustomed to. ' Meanwhile, Australia's science minister has raised concerns about the app's security, stating, 'There are a lot of questions that will need to be answered in time on quality, consumer preferences, data and privacy management. ' He advised caution, emphasizing that these issues must be carefully considered. The success of DeepSeek has challenged the notion that only large budgets and top-tier chips can lead to advancements in AI, creating uncertainty about the future of high-performance chips. Wei Sun, a principal AI analyst at Counterpoint Research, noted, 'DeepSeek has proven that cutting-edge AI models can be developed with limited compute resources. ' In contrast, OpenAI, valued at $157 billion, is facing scrutiny regarding its ability to maintain a competitive edge in innovation or justify its substantial valuation and expenditures without delivering significant returns. The potential for lower costs associated with DeepSeek has caused turmoil in financial markets, leading to a more than 3% decline in the tech-heavy Nasdaq index on January 27, which included a broad sell-off of chip manufacturers and data centers worldwide. Nvidia appears to have been the hardest hit, with its stock price dropping 17% on Monday before beginning to recover slightly on Tuesday. The chip maker, once the most valuable company in the world by market capitalization, fell to third place behind Apple and Microsoft, with its market value shrinking from $3. 5 trillion to $2. 9 trillion, according to Forbes. As a privately owned company, DeepSeek's shares are not available for purchase on major exchanges. The rise of DeepSeek is a significant victory for the Chinese government, which has been striving to establish technological independence from the West. While the Communist Party has yet to issue an official statement, Chinese state media has reported that Silicon Valley and Wall Street giants are 'losing sleep' over DeepSeek, which is 'overturning' the US stock market. In China, DeepSeek's achievements are celebrated as a testament to the country's growing technological capabilities and self-reliance. Marina Zhang, an associate professor at the University of Technology Sydney, stated, 'The company's success is seen as a validation of China's Innovation 2. 0, a new era of homegrown technological leadership driven by a younger generation of entrepreneurs. ' However, she also cautioned that this sentiment could lead to 'tech isolationism. '