DeepSeek serves as “cold shower” for the US as it overtakes ChatGPT on App Store


China’s newest artificial intelligence (AI) model, DeepSeek, is sending shockwaves through the Western tech world, raising alarm bells for ChatGPT maker OpenAI and major chip companies.

Chinese startup DeepSeek's AI Assistant overtook rival ChatGPT on Monday to become the top-rated free application available on Apple's App Store in the United States.

Powered by the DeepSeek-V3 model, which its creators say "tops the leaderboard among open-source models and rivals the most advanced closed-source models globally," the artificial intelligence application has surged in popularity among US users since it was released on January 10th, according to app data research firm Sensor Tower.

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“DeepSeek appears to bringing some genuine innovation to the architecture of general purpose and reasoning models,” Richard Clode, tech portfolio manager at Janus Henderson Investors, said.

The milestone highlights how DeepSeek has left a deep impression on Silicon Valley, upending widely held views about US primacy in AI and the effectiveness of Washington's export controls targeting China's advanced chip and AI capabilities.

AI models from ChatGPT to DeepSeek require advanced chips to power their training. The Biden administration has since 2021 widened the scope of bans designed to stop these chips from being exported to China and used to train Chinese firms' AI models.

However, DeepSeek researchers wrote in a paper last month that the DeepSeek-V3 used Nvidia's H800 chips for training, spending less than $6 million.

Although this detail has since been disputed, the claim that the chips used were less powerful than the most advanced Nvidia products Washington has sought to keep out of China, as well as the relatively cheap training costs, has prompted US tech executives to question the effectiveness of tech export controls.

Some experts state that there “truly has been a breakthrough in the cost to train models from $100 million+ to this alleged $6 million number,” which will have positive ramifications for consumers, said Jon Withaar, senior portfolio manager at Pictet Asset Management.

Little is known about the company behind DeepSeek, a small Hangzhou-based startup founded in 2023 when search engine giant Baidu released the first Chinese AI large-language model.

Since then, dozens of Chinese tech companies, large and small, have released their own AI models, but DeepSeek is the first to be praised by the US tech industry as matching or even surpassing the performance of cutting-edge U.S. models.

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Technology shares around the world slid on Monday as a surge in popularity of a Chinese discount artificial intelligence model shook investors' faith in the AI sector's voracious demand for high-tech chips.

Startup DeepSeek has rolled out a free assistant that uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centers.

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Market's reaction

However, the same success can’t be said for other big tech companies and chip makers.

Nasdaq futures fell over 3%, S&P 500 futures tumbled nearly 2%. Dominant AI chipmaker Nvidia's 8.4% slide led to declines among heavyweight mega-cap stocks in premarket trading, with Microsoft off by 4%, Meta Platforms down 3.7%, and Alphabet shedding 3.1%.

European tech stocks slid over 5%, set for their worst day since October. Chip maker ASML fell 9.4%, and Siemens Energy, which provides electric hardware for AI infrastructure, slid around 20% at one point from a record high on Friday.

Japan's Nikkei shed nearly 1%, weighed by heavyweight tech names. AI-focused startup investor SoftBank Group fell over 8%.

Experts like the CEO of Scale AI, Alexander Wang, believe that DeepSeek’s AI model is a “wake-up call for America.”

Deepseek is “a cold shower and a dose of reality for a sector that probably needed it,” Jon Withaar, senior portfolio manager at Pictet Asset Management, said.

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