DeepSeek's Surprise Entrance into the AI Arena
Thursday, January 30, 2025
DeepSeek, a Chinese AI startup, has rapidly become a major disruptor in the AI landscape with its new AI model, R1. This model has gained global attention for its ability to compete with models like OpenAI’s ChatGPT, but at a significantly lower cost. The emergence of DeepSeek has caused ripples across the tech industry, impacting stock markets and sparking debates about data privacy and the future of AI development.
DeepSeek was founded in mid-2023 by Liang Wenfeng, a Chinese hedge fund manager. The company’s AI model, DeepSeek R1, was released on January 20, 2025, and quickly gained popularity. DeepSeek is an open-source large language model that uses a method called “inference-time computing,” which activates only the most relevant parts of the model for each query, saving money and computational power.
This efficiency has enabled DeepSeek to achieve comparable results to other AI models at a much lower cost. The company reportedly only spent $6 million to develop its model, compared to the hundreds of billions being invested by major US tech companies. Nvidia has described DeepSeek’s technology as an “excellent AI advancement,” showcasing the potential of “test-time scaling”. It was developed using a stockpile of Nvidia A100 chips, which are now banned from export to China.
DeepSeek’s emergence has led to a significant drop in the stock prices of major tech companies, including Nvidia and ASML. Nvidia suffered its largest ever one-day market value loss, shedding $600 billion. This has led investors to question whether the market is overvaluing AI stocks. However, some analysts believe this is an overreaction, noting the continued enormous demand for AI. DeepSeek’s ability to achieve high performance at low costs has raised questions about the massive investments being made by U.S. tech companies in AI. Some analysts believe DeepSeek’s efficiency could drive more AI adoption.
OpenAI has accused DeepSeek of using its models illegally to train its own model. There are reports that DeepSeek may have used a technique called “distillation,” to achieve similar results to OpenAI’s model at a lower cost. DeepSeek has also experienced security breaches, exposing over a million user chat logs, API keys, and internal infrastructure details. Additionally, the company’s privacy policy states that it stores user data, including chat histories, on servers in China. These security and privacy concerns have led to the US Navy banning its use.
The rise of DeepSeek has highlighted the limitations of US sanctions on Chinese technology, with some experts suggesting that the sanctions may have unintentionally fueled domestic innovation in China. President Trump has called DeepSeek’s launch a “wake-up call” for US companies.
DeepSeek’s R1 model is capable of answering questions and generating code, performing comparably to the top AI models. However, it has faced criticism for sometimes identifying as ChatGPT. The DeepSeek AI app is available on Apple’s App Store and online, and it is free. However, the company has had to pause new user registrations due to “large-scale malicious attacks”. Due to privacy concerns, some users are exploring alternative ways to access DeepSeek, such as through Perplexity AI or by using virtual machines. Perplexity AI offers DeepSeek on its web and iOS apps, although with usage limits.
The DeepSeek story is still unfolding, with debates continuing about its security, ethical, and intellectual property implications. While some are skeptical of its longevity, especially in the US market, DeepSeek’s emergence has undoubtedly had a major impact on the tech landscape and has forced the AI sector to re-evaluate its strategies and investments.
Works Consulted:
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Picchi, Aimee. “What Is DeepSeek, and Why Is It Causing Nvidia and Other Stocks to Slump?” CBS News, 28 Jan. 2025, www.cbsnews.com/news/deep…