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Deepseek: Why the world is talking about this Chinese AI

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A Chinese-made artificial intelligence (AI) model called DeepSeek has stunned the tech world, rocketing to the top of Apple’s App Store downloads and sending shockwaves through financial markets.

Launched on January 20, DeepSeek quickly gained attention for its impressive capabilities—but what’s truly rattling investors is the company’s claim that it developed the model at a fraction of the cost of industry leaders like OpenAI’s GPT-4. The secret? Fewer advanced chips.

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This photo illustration shows the DeepSeek app on a mobile phone in Beijing on Jan. 27, 2025. AFP via Getty Images

That revelation was enough to trigger a record-breaking $600 billion loss in Nvidia’s market value—the largest single-day wipeout in U.S. history. It also raises critical questions about Washington’s tech containment strategy, as one of its key moves was banning the export of advanced chips to China. Yet, China has pushed forward, with President Xi Jinping doubling down on AI as a national priority.

Now, the world is asking: Is DeepSeek a technological breakthrough—or a geopolitical game changer?

What Is Artificial Intelligence (AI)?

At its core, artificial intelligence (AI) enables machines to learn, analyze data, and solve problems—sometimes mimicking human-like thinking. By training on vast amounts of data, AI models can recognize patterns and generate new content, powering everything from chatbots like ChatGPT to predictive analytics in finance and medicine.

But AI isn’t perfect. These models can generate misinformation, reflect biased training data, and even be manipulated for political purposes—a concern especially relevant for AI developed in heavily censored environments like China.

What Makes DeepSeek Different?

DeepSeek is a free AI-powered chatbot, similar to ChatGPT—but with a controversial edge.

  • Reports suggest it’s as powerful as OpenAI’s GPT-4 o1 model, excelling in math and coding.
  • It’s built as a “reasoning” model, meaning it processes responses incrementally rather than all at once, making it more memory-efficient and cost-effective.
  • Unlike Western AI, it is programmed to avoid politically sensitive topics—like the Tiananmen Square massacre—due to strict Chinese government censorship.
  • DeepSeek’s training cost? A mere $6 million—compared to the $100 million+ spent by OpenAI.

How did it pull this off? Some reports suggest DeepSeek’s founder stockpiled 50,000 Nvidia A100 chips—which were banned from export to China in 2022—and paired them with cheaper, less advanced chips to create a cost-efficient yet powerful model.

Yet DeepSeek isn’t immune to challenges—the app faced large-scale cyberattacks immediately after its viral success, leading to temporary registration limits and outages.

Who Owns DeepSeek?

DeepSeek was founded in December 2023 by Liang Wenfeng, a finance expert-turned-tech entrepreneur.

  • Liang, an alumnus of Zhejiang University, made his name in quantitative trading, using AI to analyze financial markets.
  • He is the CEO of High-Flyer, China’s first hedge fund to raise over 100 billion yuan ($13 million).
  • Unlike Silicon Valley tech founders, Liang emerged from the finance world, making his sudden rise in AI all the more intriguing.
  • He has openly criticized China’s AI industry for being a follower rather than an innovator—a claim DeepSeek is now challenging.

His growing influence was evident when he was seen alongside China’s Premier Li Qiang, signaling government backing.

However, not everyone is convinced. Australian Science Minister Ed Husic has already raised concerns about DeepSeek’s security and data privacy, warning that these questions need serious scrutiny.

Why Is the U.S. Worried?

DeepSeek’s rise undermines the belief that only big budgets and top-tier chips can push AI forward.

  • Wei Sun, AI analyst at Counterpoint Research, says:
    “DeepSeek has proven that cutting-edge AI models can be developed with limited compute resources.”
  • Meanwhile, OpenAI, valued at $157 billion, is now facing increasing scrutiny—can it justify its massive valuation if cheaper models can achieve similar results?

The financial fallout has been staggering:

  • On January 27, the tech-heavy Nasdaq dropped more than 3%, as investors dumped chip stocks and AI-related assets.
  • Nvidia took the hardest hit, with shares plunging 17% in a single day—before a partial rebound.
  • Nvidia, once the world’s most valuable company, slipped to third place behind Apple and Microsoft as its market cap shrank from $3.5 trillion to $2.9 trillion.

DeepSeek’s impact isn’t just about AI—it’s about China proving that it can compete, and even innovate, in a space where the U.S. has long dominated.

Will Washington respond? Will AI regulation tighten? And will American companies be forced to rethink their AI strategies?

For now, one thing is clear: The AI race just got a lot more complicated.

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