A Chinese-made artificial intelligence (AI) model called DeepSeek has shot to the top of Apple Store’s downloads, stunning investors and sinking some tech stocks.
It was released on 20 January, quickly impressing AI geeks before it got the attention of the entire tech industry – and the world.
US President Donald Trump said it was a “wake-up call” for US companies who must focus on “competing to win”.
What makes DeepSeek so special is the company’s claim that it was built at a fraction of the cost of industry-leading models like OpenAI – because it uses fewer advanced chips.
That possibility caused chip-making giant Nvidia to shed almost $600bn (£482bn) of its market value on Monday – the biggest one-day loss in US history.
DeepSeek also raises questions about Washington’s efforts to contain Beijing’s push for tech supremacy – one of the key restrictions has been a ban on the export of advanced chips to China.
Beijing, however, has doubled down, with President Xi Jinping declaring AI a top priority. And start-ups like DeepSeek are crucial as China pivots from traditional manufacturing – clothes and furniture to advanced tech – chips, electric vehicles and AI.
So what do we know about DeepSeek? What is artificial intelligence?
AI can, at times, make a computer seem like a person.
A machine uses the technology to learn and solve problems, typically by being trained on massive amounts of information and recognising patterns.
The end result is software that can have conversations like a person or predict people’s shopping habits.
In recent years, it has become best-known in recent years as the tech behind chatbots such as ChatGPT – and DeepSeek – also known as generative AI.
These programs again learn from huge swathes of data, including online text and images, to be able to make new content.
But these tools can create falsehoods and often repeat the biases contained within their training data.
Millions of people use tools such as ChatGPT to help them with everyday tasks like writing emails, summarising text, and answering questions – and others even use them to help with basic coding and studying. What is DeepSeek?
DeepSeek is the name of a free AI-powered chatbot, which looks, feels and works very much like ChatGPT.
That means it’s used for many of the same tasks, though exactly how well it works compared to its rivals is up for debate.
But the AI model that powers it – called R1 – has some 670 billion parameters, making it the largest open-source large language model yet, according to Anil Ananthaswamy, author of Why Machines Learn: The Elegant Math Behind Modern AI.
It is reportedly as powerful as OpenAI’s O1 model – released by OpenAI at the end of last year – in mathematics, coding and reasoning.
R1 is what’s called a reasoning model. These models produce responses incrementally, simulating a process similar to how humans reason through problems or ideas. It uses less memory than its rivals, ultimately reducing the cost to perform tasks.
Like many other Chinese AI models – Baidu’s Ernie or Doubao by ByteDance – DeepSeek is trained to avoid politically sensitive questions.
When the BBC asked the app what happened at Tiananmen Square on 4 June 1989, DeepSeek did not give any details about the massacre, a taboo topic in China.
It replied: “I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses.”
Chinese government censorship is a huge challenge for its AI aspirations internationally. But DeepSeek’s base model appears to have been trained via accurate sources while introducing a layer of censorship or withholding certain information via an additional safeguarding layer.
Deepseek says it has been able to do this cheaply – researchers behind it claim it cost $6m (£4.8m) to build, a fraction of the “over $100m” alluded to by OpenAI CEO Sam Altman when discussing ChatGPT4.
How exactly they did this is still unclear. DeepSeek’s founder reportedly built up a store of Nvidia A100 chips, which have been banned from export to China since September 2022.
Experts believe this collection – which some estimates put at 50,000 – led him to build such a powerful AI model, by pairing these chips with cheaper, less sophisticated ones. Who is behind DeepSeek?
DeepSeek was founded in December 2023 by Liang Wenfeng, and released its first AI large language model the following year.
Not much is known about Liang, who graduated from Zhejiang University with degrees in electronic information engineering and computer science. But he now finds himself in the international spotlight.
He was recently seen at a meeting hosted by China’s premier Li Qiang, reflecting DeepSeek’s growing prominence in the AI industry.
Unlike many American AI entrepreneurs who are from Silicon Valley, Mr Liang also has a background in finance.
He is the CEO of a hedge fund called High-Flyer, which uses AI to analyse financial data to make investment decisons – what is called quantitative trading. In 2019 High-Flyer became the first quant hedge fund in China to raise over 100 billion yuan ($13m).
In a speech he gave that year, Liang said, “If the US can develop its quantitative trading sector, why not China?”
In a rare interview last year, he said China’s AI sector “cannot remain a follower forever”.
He went on: “Often, we say there’s a one or two-year gap between Chinese and American AI, but the real gap is between originality and imitation. If this doesn’t change, China will always be a follower.”
Asked why DeepSeek’s model surprised so many in Silicon Valley, he said: “Their surprise stems from seeing a Chinese company join their game as an innovator, not just a follower – which is what most Chinese firms are accustomed to.”
Australia’s science minister has raised some doubts over the security of the app.
“There are a lot of questions that will need to be answered in time on quality, consumer preferences, data and privacy management,” Ed Husic told ABC.
“I would be very careful about that. These type of issues need to be weighed up carefully.” How are US companies hit?
DeepSeek’s achievements undercut the belief that bigger budgets and top-tier chips are the only ways of advancing AI, a prospect which has created uncertainty about the future of high-performance chips.
“DeepSeek has proven that cutting-edge AI models can be developed with limited compute resources,” says Wei Sun, principal AI analyst at Counterpoint Research.
“In contrast, OpenAI, valued at $157 billion, faces scrutiny over its ability to maintain a dominant edge in innovation or justify its massive valuation and expenditures without delivering significant returns.”
The company’s possibly lower costs roiled financial markets on 27 January, leading the tech-heavy Nasdaq to fall more than 3% in a broad sell-off that included chip makers and data centres around the world.
Nvidia appears to have been hit the worst as its stock price plunged 17% over the course of the day.
The chip maker had been the most valuable company in the world, when measured by market capitalisation, but fell to third place after Apple and Microsoft on Monday, when its market value shrank to $2.9tn from $3.5tn, Forbes reported.
-BBC
