Chinese startup DeepSeek has attracted much attention after its free AI assistant quickly became the most popular app on the App Store, even overtaking ChatGPT. As Reuters notes, the success calls into question the dominance of American companies in AI and the effectiveness of US export restrictions on the supply of advanced chips to China.
What is DeepSeek?
- DeepSeek is known to be based in the city of Hangzhou. The startups was founded in 2023. A few days ago, it released its Deepseek R-1 AI model as an open source, meaning that anyone can take the basic code, adapt it, and even modify it to suit their needs.
- Deepseek R-1, which is based on a large base model called DeepSeek-V3, outperformed OpenAI's latest o1 model in several independent tests, according to the developers.
- One feature, again according to the developers, is the use of less expensive chips and smaller amounts of data for training, which contradicts the widespread belief that significant investment in powerful equipment is required to develop AI.
- According to the developers, the model was created at minimal cost: less than $6 million and in just two months, using the power of Nvidia H800 chips, which were limited by US sanctions against China. Despite the fact that the H800 is not Nvidia's most advanced development, DeepSeek managed to create a model that can compete with the most powerful AI models in the United States.
However, much remains unknown about the details of DeepSeek's development, as well as the hardware it uses.
Over the weekend of January 25-26, the AI assistant topped the free app charts in the App Store in the US, UK, UAE, Japan, South Korea, and China.
Screenshot: App Stor Top Charts
How did Financial Market react?
DeepSeek's popularity also sent shares of the world's top technology companies tumbling. Nasdaq futures fell 2.6% in early European trading, while shares of Nvidia, Tesla, Amazon, and Meta lost between 2% and 7%.
SoftBank Group, an investor in artificial intelligence startups, fell more than 8%, heading for its biggest one-day drop since Sept. 30.
Chip equipment giant Tokyo Electron fell 5%. Meanwhile, technology markets in Taiwan and South Korea were closed.
European technology stocks, particularly Dutch computer chip maker ASML, which works with customers including TSMC, Intel and Samsung, are likely to come under pressure in the open market.
Market reaction in China was also mixed, with the CSI300 index of AI-related stocks falling 2.2%, but shares of big data companies rising 4%.
