The AI industry has been shaken by the rise of DeepSeek, a Chinese AI model which has swiftly climbed the ranks of Apple’s App Store downloads. Its rapid ascent has startled investors, impacted global tech stocks and reignited discussions on China’s AI ambitions amid ongoing US-China technological competition.
DeepSeek’s latest version, released on 20 January 2025, has quickly gained recognition for its efficiency and cost-effectiveness. Unlike its Western counterparts, DeepSeek reportedly operates on a fraction of the computing resources used by OpenAI’s models, challenging the prevailing notion that cutting-edge AI development requires massive investments in high-performance chips.
This cost-effectiveness has had a direct impact on the semiconductor industry. The revelation that DeepSeek achieved advanced AI capabilities with fewer chips contributed to a historic USD600 billion loss in Nvidia’s market value—highlighting investor concerns about the future demand for premium AI chips.
DeepSeek’s emergence raises questions about the effectiveness of US restrictions on semiconductor exports to China. Washington has sought to limit China’s AI advancements by curbing access to advanced chips, yet DeepSeek’s success suggests Chinese firms are finding ways to circumvent these limitations through alternative technologies.
Meanwhile, Beijing continues to prioritise AI as a national strategic sector. President Xi Jinping has emphasized China’s ambitions to lead in AI innovation, with DeepSeek serving as a key player in this push for technological self-sufficiency.
DeepSeek is designed as a generative AI model, comparable to OpenAI’s GPT series. It is reportedly on par with OpenAI’s o1 model in mathematical and coding tasks while requiring significantly fewer computing resources. Its efficiency is attributed to a blend of advanced Nvidia A100 chips—stockpiled before export bans—and less sophisticated alternatives.
However, like other Chinese AI models, DeepSeek is subject to government-imposed content restrictions. When queried about politically sensitive topics, the model avoids direct responses. This presents challenges for its adoption outside of China, particularly in jurisdictions that uphold free speech and transparency.
DeepSeek’s impact has been felt beyond AI development. The broader technology sector has experienced volatility, with AI-related stocks reacting sharply to its emergence. The Nasdaq saw a significant sell-off, and Nvidia’s stock tumbled before beginning a slow recovery.
Investors are now reassessing their assumptions about the AI industry’s cost structures and the future of semiconductor demand. DeepSeek’s success has demonstrated that advanced AI models can be developed with more economical approaches, potentially shifting investment strategies and reshaping the competitive landscape.
DeepSeek’s rise signifies a crucial moment in the global AI race. Its ability to achieve high-level performance with fewer resources challenges traditional industry paradigms and highlights China’s growing technological independence. As DeepSeek gains traction, it will be crucial to monitor how US and European AI firms respond, as well as whether regulatory bodies adjust their policies in light of this development.
Ultimately, DeepSeek’s impact extends beyond technological advancement—it underscores the shifting dynamics of global AI leadership, with China asserting itself as a formidable competitor in the rapidly evolving AI sector.
