In the world of artificial intelligence (AI), breakthroughs are often expected to come from well-established giants like OpenAI, Google, or Microsoft. However, on January 20, 2025, a Chinese-made AI model named DeepSeek managed to steal the spotlight and turn the industry upside down. In a matter of days, it climbed to the top of Apple’s App Store downloads, leaving investors in shock, causing massive stock losses, and shaking the tech community to its core.
The arrival of DeepSeek didn’t just grab attention for its impressive AI capabilities; it also sparked a massive debate in the tech world about the future of artificial intelligence. As DeepSeek quickly gained popularity, it triggered a rapid response from financial markets. Notably, Nvidia, a chip-making giant, saw its market value drop by nearly $600 billion in a single day — the largest one-day loss in US history.
This shake-up was partly due to the claim that DeepSeek’s developers had built their AI model at a fraction of the cost of its competitors, like OpenAI’s GPT models. While AI development has traditionally been linked to large budgets and cutting-edge chips, DeepSeek is challenging that notion by demonstrating that powerful AI models can be created with far fewer resources. For those keeping an eye on the industry, this poses serious questions about the future of AI development and the power dynamics between the East and West in this space.
But there’s more to DeepSeek than just the disruption it’s caused in the financial markets. Its rise raises several key questions about the global race for technological dominance, especially in AI, and the implications it has for US-China relations.
At its core, DeepSeek is a chatbot powered by AI, much like OpenAI’s ChatGPT, Google’s Bard, or other generative AI models. DeepSeek’s AI is designed to generate human-like responses and perform a wide range of tasks, from writing emails to summarizing long documents, and even assisting with coding.
The underlying model that powers DeepSeek is called R1, and it boasts a staggering 670 billion parameters, which makes it the largest open-source large language model to date. For context, these parameters are the building blocks that help the AI understand and generate responses, similar to how humans process information and solve problems.
Despite being from a Chinese company, DeepSeek’s AI is said to be just as powerful as OpenAI’s latest models in areas such as mathematics, coding, and reasoning. This is a significant feat considering that OpenAI’s models have been considered the gold standard in the AI industry.
DeepSeek’s key innovation is its efficiency. It uses less memory compared to its competitors, ultimately reducing the costs of running AI tasks. In fact, DeepSeek’s creators claim that they were able to build the entire model for just $6 million — a fraction of the $100 million cost that OpenAI has said it spent on developing its own AI models.
So, how did DeepSeek manage to achieve this groundbreaking feat? The answer lies in a combination of creative engineering and strategic resource management.
The company behind DeepSeek, founded by Liang Wenfeng in December 2023, reportedly used a combination of cheaper and more readily available chips to train the model, instead of relying solely on expensive advanced chips that are typically needed to run such complex models. It’s also believed that DeepSeek’s founder stockpiled Nvidia A100 chips, which are crucial for training AI models but have been banned from export to China since September 2022. These chips were paired with other, less sophisticated chips, allowing DeepSeek to build a model that competes with the best without the hefty price tag.
Despite these cost-saving methods, the model still achieves impressive performance. R1 is what’s known as a reasoning model, meaning it incrementally processes information to simulate human-like reasoning, making its responses more thoughtful and contextually accurate.
One aspect of DeepSeek that has raised eyebrows is the model’s built-in censorship features. Just like many other Chinese AI models, DeepSeek avoids discussing politically sensitive topics. For instance, when asked about the Tiananmen Square incident in 1989, the AI declined to provide any details, a response that reflects the Chinese government’s strict controls over information.
While this censorship is controversial in the West, it’s not entirely surprising, given China’s strict information policies. DeepSeek’s creators appear to have developed their AI by training it on high-quality, accurate data sources, but with a layer of censorship built in to align with local laws. This limitation has led to some concerns over the model’s potential for international use, particularly in countries that value free speech and transparency.
The mastermind behind DeepSeek is Liang Wenfeng, a relatively unknown figure until recently. Liang, who holds degrees in electronic information engineering and computer science from Zhejiang University, had a background in finance before entering the AI industry. He is also the CEO of High-Flyer, a hedge fund that uses AI to analyze financial data and make investment decisions.
Liang has long believed that China should not merely follow the US in the tech world but strive to innovate and lead in AI and other advanced technologies. He has expressed that China’s AI sector has the potential to compete with and even surpass Western giants, and DeepSeek’s success seems to be proving this point.
The rise of DeepSeek comes at a time when global competition in the tech industry is intensifying, particularly between the US and China. While US companies have dominated the AI sector for years, China has been making significant strides, pouring resources into its tech sector to catch up — and sometimes surpass — its Western counterparts.
DeepSeek’s success is a clear demonstration of China’s growing technological prowess. It challenges the widely held belief that only companies with large budgets and top-tier chips can develop cutting-edge AI models. By proving that powerful AI models can be built at a fraction of the cost, DeepSeek has thrown a wrench in the existing assumptions about how AI development should be approached.
This development comes at a critical time when the US government has been trying to contain China’s rise in tech. The US has restricted the export of advanced chips to China, hoping to slow down China’s progress in AI and other high-tech fields. However, DeepSeek’s ability to build a competitive AI model despite these restrictions suggests that China’s push for technological self-reliance is paying off.
US President Donald Trump weighed in on DeepSeek’s success, calling it a “wake-up call” for American companies. According to him, it should serve as a reminder that the US must refocus on “competing to win” in the global tech race. The success of DeepSeek is a direct challenge to the US’s position as the leader in AI, and it underscores the need for more innovation, efficiency, and strategic thinking in the industry.
For US tech giants like Nvidia and OpenAI, the rise of DeepSeek has raised questions about their long-term dominance. Nvidia, in particular, has been one of the biggest losers in this disruption, seeing its stock price plummet after DeepSeek’s emergence. If companies like DeepSeek can make AI models that are just as powerful at a fraction of the cost, the days of unchecked growth and sky-high valuations for companies that dominate the AI space may be numbered.
DeepSeek’s success is a significant milestone in the world of AI, but its future remains uncertain. While the company is receiving praise in China for its accomplishments, it faces significant challenges in gaining international acceptance. Issues like censorship and concerns over data privacy will need to be addressed for DeepSeek to gain widespread adoption outside of China.
The US and other Western countries may continue to scrutinize DeepSeek’s operations, particularly in terms of its data management practices and security risks. These concerns may impact the company’s ability to expand globally, but if DeepSeek can overcome these hurdles, it could revolutionize the AI landscape.
DeepSeek’s rise has signaled a new era in AI innovation, one where efficiency, creativity, and strategic resource management may be just as important as cutting-edge technology. The success of this Chinese startup is a wake-up call for tech companies worldwide, reminding them that cost-efficiency and innovation will be the key drivers of success in the future of AI.
As the world watches, it remains to be seen whether DeepSeek can maintain its momentum and expand its reach. However, one thing is clear: the age of AI dominance by a few select companies may be coming to an end, and a new wave of global competition is just beginning.
Unlike traditional generative models that generate responses in a single pass, R1 adopts an incremental reasoning approach. This mimics human problem-solving, allowing the AI to break down tasks step-by-step and provide more logical and structured answers. This capability makes it particularly effective in complex domains like coding, advanced mathematics, and technical problem-solving.
DeepSeek’s base model is trained on globally accurate datasets, ensuring high-quality responses. The censorship layer is applied afterward, acting as a filter for politically sensitive queries. This design allows the core AI to retain its technical capabilities while meeting local regulatory requirements. However, the company’s long-term global success will hinge on how well it can adapt this dual-layered approach to different markets.
DeepSeek demonstrated that high-performing AI models can be developed without relying solely on top-tier chips like Nvidia’s H100 series. This challenges the narrative that advanced chips are indispensable for cutting-edge AI. Investors interpreted this as a potential threat to Nvidia's market dominance, leading to a massive sell-off and a $600 billion loss in market value.
DeepSeek’s success signals a shift in AI innovation toward cost-efficiency and creative problem-solving, rather than just access to expensive infrastructure. This could democratize AI development, enabling talent in emerging markets to compete on the global stage. It also highlights China’s ability to cultivate homegrown talent capable of delivering disruptive innovations, challenging the traditional dominance of Silicon Valley.
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In the world of artificial intelligence (AI), breakthroughs are often expected to come from well-established giants like OpenAI, Google, or Microsoft. However, on January 20, 2025, a Chinese-made AI model named DeepSeek managed to steal the spotlight and turn the industry upside down. In a matter of days, it climbed to the top of Apple’s …
