Chinese DeepSeek app offering cheaper alternative to U.S.' competitors, stunning Silicon Valley

Chinese DeepSeek app offering cheaper alternative to U.S.' competitors, stunning Silicon Valley

As the fate of TikTok is still hanging in the air, Washington is investigating the implications of the meteoric rise of another Chinese internet sensation: DeepSeek. China latest attempt to devise a general AI application shook the tech world as never before. The Chinese AI startup released an open-sourced problem solving model, R1, that stunned Silicon Valley. The model uses far less computing power and chips to achieve the same or better results than its U.S. counterparts. This not only means that it is far cheaper to operate, but that NVIDIA – which delivers most of the chips used in AI applications – will sell a lot less chips. DeepSeek used 50,000 NVIDIA graphics processing units (GPUs) compared to OpenAI's 500,000. Although the sale of NVDIA GPUs to China is restricted due to a trade embargo, DeepSeek still succeeded to procure enough processors to achieve the stunning breakthrough. Demand for data centers and electricity would also be reduced.

Many U.S. tech stocks slumped on the stock markets in anticipation, with prices dropping by a combined USD1 trillion. NVIDIA had USD600 billion wiped off its market value in the biggest fall in U.S. stock market history. DeepSeek's app shot to the top of the app stores, although it suffered a cyberattack prompting it to limit new registration to applicants with a Chinese (+86) phone number. According to Chinese media, the cyberattacks – denial of service (DoS) and brute force attacks – originated in the U.S.

Privacy concerns about TikTok seem equally valid for DeepSeek, which is headquartered in Hangzhou and keeps users' data on servers in China. U.S. President Donald Trump said that: “The release of DeepSeek, AI from a Chinese company, should be a wake-up call for our industries that we need to be laser-focused on competing to win.” Venture capitalist Marc Andreessen, who is advising the Trump White House, called R1 “AI’s Sputnik moment”, a bona fide breakthrough. The global AI community widely considered the U.S. the leader in AI, but R1 has called that dominance into question. Howard Lutnick, President Donald Trump’s Nominee for Secretary of Commerce, who would oversee future export controls on AI technology, told a Senate confirmation hearing that it appeared DeepSeek had misappropriated American AI technology and he vowed to impose restrictions. “I do not believe that DeepSeek was done all above board. That’s nonsense,” Lutnick said. “I’m going to be rigorous in our pursuit of restrictions and enforcing those restrictions to keep us in the lead.”

China’s DeepSeek has reshaped the pathways to hi-tech breakthroughs and shown how talent and software integration can be more powerful than scale, money or a “copycat” approach, according to observers. Denis Simon, Non-resident Fellow at the U.S. think tank Quincy Institute for Responsible Statecraft, said the most important lesson for the West here was that “there were many paths to the same innovation target”, as DeepSeek had followed an innovative approach to push “the frontier of the current thinking about AI technology”. “By developing a lower cost, more efficient, and perhaps even more effective path to producing general artificial intelligence, DeepSeek has shown that it’s not all about scale and money,” Simon said. “In fact, it is about cultivating talent and thinking more about software integration than it is about accumulating thousands and thousands of advanced chips.” He was particularly impressed with DeepSeek’s primary engine – its pool of fresh talent, many of them young researchers and doctorates from top Chinese universities. “For me, the basic lesson is: never count China out!,” Denis Simon said.

The young team behind V3 and R1, led by DeepSeek Founder Liang Wenfeng, was mostly trained in China, unlike those at many Chinese tech companies that prefer to hire those who have studied overseas. “It is becoming increasingly evident where the true haven for young talent lies,” Hu Xijin, former Editor of the Global Times, posted on social media. He also pointed to growing U.S. restrictions on Chinese seeking to study advanced science and engineering. “Due to growing U.S. skepticism and suppression, a large number of highly skilled Chinese scientists and engineers are leaving the U.S. and returning to China,” Hu wrote. Gong Jiong, Professor of Economics at the University of International Business and Economics (UIBE) in Beijing, said more Chinese firms would achieve similar successes to DeepSeek and “surprise” the world with their innovations, as the momentum of China’s innovation was “unstoppable”. “The fierce competition in the Chinese market forces enterprises to innovate,” he said.

Alibaba Group Holding released an upgraded version of its Qwen artificial intelligence (AI) model, which it said “comprehensively outperformed” DeepSeek-V3 in certain benchmark tests, the South China Morning Post reports.