Explained: What Makes China's DeepSeek A Game-Changer In AI

Artificial Intelligence (AI) is constantly evolving, and there's a new player in the market. DeepSeek, a new AI model from China, has captured the attention of the tech world, surpassing the likes of ChatGPT, Gemini, and Claude AI in performance.

What is DeepSeek?

DeepSeek is an advanced AI model developed by a Hangzhou-based research lab of the same name. It was founded in 2023 by Liang Wenfeng, an engineer with a background in AI and quantitative finance.

Based on the DeepSeek-V3 model, an advanced open-source AI system, it surpassed OpenAI's ChatGPT to become the top-rated free app on Apple's App Store in several countries, including the US, the UK, and China. DeepSeek's rise to prominence made a splash in Silicon Valley, challenging the belief that the US held a dominant position in this space.

DeepSeek's latest release, R1, rivals industry leaders such as OpenAI and Anthropic but stands out for being cost-efficient, open source, and offering unlimited free usage. It enables high-performance AI access without the steep costs typically associated with such technologies.

How is DeepSeek different from OpenAI and Meta?

DeepSeek sets itself apart from competitors like OpenAI and Meta by focusing on affordability and efficiency. While companies like OpenAI and Meta develop highly advanced models that require significant resources and expensive AI chips (like Nvidia's H100 GPUs), DeepSeek has created models that perform similarly but at a fraction of the cost. DeepSeek's use of more affordable AI hardware and innovative approaches to model training enables it to compete with the big players while keeping costs low.

Its chatbot app also offers unique features, such as articulating its reasoning before responding, distinguishing it from OpenAI's models like ChatGPT. This open-source approach allows developers to build on DeepSeek's technology, a key part of its appeal.

Why is DeepSeek gaining attention?

The key reason for the buzz around DeepSeek is that the Chinese AI assistant is free, unlimited, and open-source. It is celebrated for its transparency, efficiency, and ability to make AI accessible to everyone.

DeepSeek's breakthrough comes at a time when the US has placed restrictions on advanced semiconductor exports to China, with the aim of limiting China's ability to advance in AI. DeepSeek has managed to work around these restrictions by developing models that require fewer resources.

This has sparked concern in the US, where tech giants Nvidia, Meta, and Microsoft have heavily invested in AI infrastructure that may soon face increased competition from low-cost alternatives like DeepSeek.

Impact on US stocks

The rise of DeepSeek has had an immediate effect on stock markets. Shares of major US AI-related companies, including Nvidia, Meta, and Microsoft, dropped in response to DeepSeek's success. Analysts have warned that the rise of low-cost Chinese alternatives to established US AI models could disrupt the investment landscape, forcing companies to reconsider their AI strategies.

As DeepSeek continues to gain traction, other companies in the AI supply chain, such as chipmakers and AI hardware manufacturers, may see their profits squeezed.