DeepSeek, a burgeoning Chinese artificial intelligence company, has sent ripples through the global tech industry with the launch of its AI model, DeepSeek-R1. Founded in 2023 by Liang Wenfeng in Hangzhou, the company is challenging the dominance of leading tech firms with its cost-effective and efficient AI solutions. The emergence of DeepSeek-R1, which has been lauded by prominent figures including OpenAI chief Sam Altman, has triggered significant market reactions, notably impacting major US tech companies.
DeepSeek was established by Liang Wenfeng, a 40-year-old information and electronic engineering graduate who also founded a hedge fund supporting the company. His latest innovation, DeepSeek-R1, launched earlier this month, has been praised for its performance and affordability. OpenAI's Sam Altman described it as "an impressive model, particularly around what they're able to deliver for the price." However, Altman emphasized that OpenAI aims to "obviously deliver much better models" in future developments.
DeepSeek-R1 has emerged as a formidable competitor, boasting performance comparable to some of OpenAI's latest models. This AI model excels in tasks such as mathematics, coding, and natural language reasoning. A significant achievement of DeepSeek-R1 is its training efficiency; the model operates on just 2,000 specialized chips, a stark contrast to the estimated 16,000 chips utilized by leading models. This technological advancement allows DeepSeek to offer AI capabilities at a fraction of the traditional costs.
The company reports that training DeepSeek-R1 required an investment of approximately $6 million (£4.2 million), far less than its competitors. This cost-effective approach has naturally sparked discussions about the future of America's AI leadership and the substantial investments anticipated from US firms. US President Donald Trump weighed in on the matter, labeling DeepSeek's rise as "a wake-up call" for the US technology sector.
The financial implications of DeepSeek's emergence were immediately felt in the stock market. Shares of major tech companies, including Nvidia, experienced sharp declines. The chip giant alone saw a staggering loss of more than $500 billion (£400 billion) in market value following DeepSeek's announcement.
DeepSeek has rapidly gained popularity beyond industry circles. Within just a week of its release, it became the most downloaded free app in the United States. However, Liang Wenfeng expressed surprise at the sensitivity surrounding pricing issues, stating:
"We didn't expect pricing to be such a sensitive issue."
Liang further explained:
"We were simply following our own pace, calculating costs, and setting prices accordingly."