DeepSeek, a Chinese artificial intelligence (AI) app, has rapidly ascended to the pinnacle of Apple's App Store, surpassing notable competitors like ChatGPT. With its top rating across the United States, United Kingdom, and China, the app has made significant waves in the AI sector. Founded in 2023 by Liang Wenfeng in Hangzhou, DeepSeek's success challenges the dominance of American AI technology and raises questions about global leadership in AI development.
The app's core is the open-source DeepSeek-V3 model, developed at a cost of less than $6 million. This economical approach to AI development sets it apart from its competitors. DeepSeek-R1, the company's AI model, is particularly noteworthy, drawing comparisons to OpenAI's latest models due to its impressive performance in mathematics, coding, and natural language reasoning. This achievement suggests significant advancements in AI capabilities without the extensive financial investments typical of Silicon Valley.
DeepSeek's launch in January has been met with an enthusiastic reception, challenging the perception of America's unassailable lead in the AI industry. Liang Wenfeng, a 40-year-old graduate in information and electronic engineering, is the visionary behind this venture. He also founded the hedge fund that financially supported DeepSeek, demonstrating his commitment to pioneering AI innovation.
The app's development coincides with heightened US restrictions on advanced chip sales to China since 2021. These chips are crucial for training AI models like ChatGPT and DeepSeek. However, Liang reportedly amassed a stockpile of Nvidia A100 chips before they were banned from export to China. This strategic foresight enabled DeepSeek to create AI models requiring significantly less computing power than their predecessors.
"We didn't expect pricing to be such a sensitive issue," said Mr. Liang.
Despite these challenges, DeepSeek's affordability has captured the market's attention. Liang emphasizes their deliberate approach to pricing.
"We were simply following our own pace, calculating costs, and setting prices accordingly," he stated.
Fiona Cincotta highlights the unexpected impact of this strategy.
"This idea of a low cost Chinese version hasn't necessarily been forefront, so it's taken the market a little bit by surprise," she noted.
The release of DeepSeek-R1 has had a ripple effect on the tech industry. Marc Andreessen, a Silicon Valley venture capitalist and advisor to Donald Trump, described it as "AI's Sputnik moment." The launch has also negatively impacted share prices of major AI-related companies such as Nvidia, Microsoft, and Meta.
Amidst these developments, the Stargate Project—a venture backed by a consortium of US tech firms and foreign investors—has announced a staggering $500 billion investment in AI infrastructure in Texas. This move aims to bolster America's position in the global AI race.
Vey-Sern Ling warns of potential consequences for the AI supply chain.
"Potentially derail the investment case for the entire AI supply chain," he cautioned.