The Rise of DeepSeek: How It Shook Tech Stocks and Challenged US AI Dominance

• Chinmay
• January 28, 2025
• Artificial Intelligence
• AI cost efficiency, AI disruption, AI innovation, AI market, AI-powered chatbot, Chinese AI companies, DeepSeek, global AI competition, Nvidia loss, Semiconductor Technology, tech stocks drop
• 0 Comments

DeepSeek, a Chinese artificial intelligence company, has made waves in the global tech landscape with the launch of its AI-powered chatbot app, which has become the most downloaded free app on Apple’s store in the US since its release in January. This unexpected rise has not only captured public attention but also triggered a ripple effect in financial markets, shaking the dominance of US-based AI companies.

What is DeepSeek?

Founded in Hangzhou, China, in July 2023, DeepSeek is a trailblazer in the AI industry. The company achieved instant fame with its AI assistant app, which has been praised for its efficiency and personality-driven responses. Available on Apple’s App Store and its official website, the app quickly became the top-rated free application in the US.

The Innovator Behind DeepSeek: Liang Wenfeng

DeepSeek’s success can be attributed to its visionary founder, Liang Wenfeng. An information and electronic engineering graduate, Liang funded the company using capital from a hedge fund he established. One of his bold moves was stockpiling Nvidia A100 chips, now restricted for export to China, along with cost-effective alternatives. By strategically pairing high-end and lower-end chips, Liang launched DeepSeek on a budget reportedly as low as $6 million—a fraction of the billions spent by US-based AI companies.

Why DeepSeek Matters

DeepSeek’s AI assistant rivals industry leaders like ChatGPT but at a fraction of the development cost. The app’s ability to answer questions and generate creative responses has drawn comparisons to US-based AI systems, with some users even preferring its output for its “personality.” However, the app sidesteps politically sensitive topics, reflecting China’s content restrictions.

DeepSeek’s Impact on Financial Markets

The low-cost development of DeepSeek has disrupted the perception that AI innovation requires massive budgets and advanced chips. This revelation roiled financial markets, especially on January 27, when the tech-heavy Nasdaq fell over 3% in a broad sell-off. Nvidia, the US chipmaker whose products power much of the AI industry, saw its stock plunge by 17%, resulting in a $600 billion loss in market value—the largest single-day drop for any company in US history. DeepSeek’s reliance on less advanced chips challenges the narrative of high-performance chip dependency, creating uncertainty for companies heavily invested in premium semiconductor technology.

The Road Ahead

DeepSeek’s meteoric rise highlights a significant shift in the AI landscape. It showcases how cost-effective strategies and innovative thinking can rival established giants, pushing the boundaries of what’s possible in AI development. As the industry adjusts to this disruption, the future of AI dominance hangs in the balance, with DeepSeek proving that agility and ingenuity can challenge even the largest players.