DeepSeek: The Chinese AI Startup Disrupting Tech Stocks and Raising Concerns Among Investors
The debut of DeepSeek’s powerful AI model has sent shock waves through the U.S. tech sector, sparking both excitement and anxiety.
Chinese tech startup DeepSeek has quickly gained attention following the release of its artificial intelligence model, which rivals major U.S. competitors like ChatGPT, but at a fraction of the computing power. The company's sudden prominence has caused significant fluctuations in U.S. tech stocks, triggering mixed reactions from investors, tech leaders, and politicians alike.
DeepSeek, launched in 2023, unveiled its AI product, R1, just a week ago. The model has already surpassed other leading AI systems, including Google’s Gemini 2.0 Flash, Anthropic’s Claude 3.5 Sonnet, and OpenAI’s GPT-4o, according to the Artificial Analysis Quality Index, a respected AI performance ranking.
The company’s AI is a large language model that functions similarly to other tools like ChatGPT, allowing users to interact with it through apps or software, receiving text-based answers in both Chinese and English.
What is DeepSeek and Who Is Behind It?
DeepSeek was founded by Liang Wenfeng, an entrepreneur based in Hangzhou, China. Liang previously established High-Flyer, a hedge fund that employs AI-driven trading strategies. High-Flyer also invested in DeepSeek, providing initial employees and funding to get the company off the ground.
Market Impact and Reactions
The unveiling of DeepSeek’s AI model sent shockwaves through the U.S. tech market, particularly affecting the stock prices of companies like Nvidia, which produces chips essential for AI training. As speculation grew that DeepSeek might outpace U.S. competitors, Nvidia saw a sharp drop in its stock price on Monday, though some recovery was observed the following day.
Nvidia, in a statement, acknowledged DeepSeek's "excellent AI advancement," but emphasized that Nvidia’s chips remained crucial for AI inference. DeepSeek, however, claimed its model was trained using fewer Nvidia chips than expected.
Industry Figures React
The reaction from major tech figures has been mixed. Microsoft CEO Satya Nadella, whose company is a significant investor in OpenAI, praised DeepSeek’s new model as “super impressive.”
Marc Andreessen, co-creator of Mosaic (one of the first web browsers), likened DeepSeek’s R1 to a “Sputnik moment,” referring to the Cold War-era space race, suggesting that DeepSeek’s emergence could push the U.S. to reassess its technological dominance.
OpenAI CEO Sam Altman, while previously critical of DeepSeek, acknowledged the new model's impressive capabilities, particularly considering its price. On X (formerly Twitter), Altman expressed enthusiasm for the new competition, promising improvements to OpenAI's offerings.
Security and Political Concerns
DeepSeek has faced scrutiny over security concerns, particularly as a Chinese company. Experts warn that user data could be subject to Chinese government surveillance under local laws. The company has also faced criticism for potential censorship in its responses. For instance, when asked about Taiwan, DeepSeek’s R1 model either avoids the subject or states that Taiwan is “an inalienable part of China’s territory,” aligning with Beijing’s stance on the issue.
Political Reactions
Political figures in the U.S. have responded with a mix of caution and concern. President Donald Trump described DeepSeek as a potential "positive development" for the AI industry, suggesting that its success should act as a “wake-up call” for American tech companies. However, he did not explicitly call for regulation.
Rep. John Moolenaar (R-Mich.), chair of the House Select Committee on China, expressed a desire for the U.S. to act swiftly to slow DeepSeek’s rise, signaling greater concern over the company’s potential influence. On the other hand, Sen. Mark Warner (D-Va.) defended existing export controls on advanced chip technology, but indicated that further regulation might be necessary.
As DeepSeek continues to grow, its influence on both the tech industry and international relations is only beginning to be understood, with many watching closely to see how it impacts U.S. companies and government policy moving forward.