Wall Street and Silicon Valley suffered a significant blow on Monday due to mounting fears surrounding DeepSeek, a Chinese artificial intelligence (AI) startup that claims to have developed an advanced model at a fraction of the cost of its U.S. counterparts.
AI companies continue to grow globally, with increasing investments from governments and private capital serving as a critical catalyst. According to a recent report by Markets and Markets, the global AI market is projected to grow at a compound annual growth rate of 38% through 2030, reaching a value of over $1 trillion.
What Is DeepSeek?
On Monday, shares of Nvidia and other major tech giants lost over $1 trillion in market value as investors assessed the details. DeepSeek claims to have built its AI model in just a few months for only $6 million, disrupting expectations in an industry that has forecasted hundreds of billions of dollars in spending on chips and other infrastructure.
Over the weekend, DeepSeek soared to the top of Apple’s App Store charts, displacing OpenAI’s ChatGPT and other competitors. Its rapid rise has sparked panic that the U.S. could lose its AI edge to China.
Founded in May 2023 and based in Hangzhou, China, DeepSeek develops open-source AI models, meaning they are publicly accessible and can be used by any developer.
Earlier this month, DeepSeek released details about R1, the reasoning model behind its chatbot. The AI company drew attention in Silicon Valley with a research paper explaining how it built the model. DeepSeek claims its model excels in problem-solving while being significantly cheaper to train and operate than its rivals.
Is DeepSeek Better Than ChatGPT?
DeepSeek asserts that its R1 model performs “on par” with OpenAI’s latest release.
Alexandr Wang, CEO of Scale AI, recently told CNBC that DeepSeek is “the highest-performing or roughly on par with the best U.S. models.”
DeepSeek’s largest shareholder is Liang Wenfeng, who heads the Chinese hedge fund High-Flyer, valued at $8 billion. High-Flyer shares an office building with DeepSeek’s headquarters, according to Chinese corporate records obtained by Reuters.
Does DeepSeek Engage in Censorship?
The AI chatbot has already faced accusations of rampant censorship aligned with the Chinese Communist Party’s preferences.
DeepSeek admitted that its “programming and knowledge base are designed to comply with China’s laws and regulations, as well as core socialist values,” according to a report published by the U.S. House Select Committee on China.
The chatbot has reportedly self-censored its responses when asked about Chinese leader Xi Jinping, the 1989 Tiananmen Square massacre, human rights abuses against Uyghurs in Xinjiang, and whether Taiwan is a country, as evidenced by examples circulating on social media.
Is DeepSeek Publicly Traded?
DeepSeek is a private startup and is not publicly traded in the U.S.
Is DeepSeek a Threat to Nvidia?
Nvidia shares plunged a staggering 17% during Monday’s trading due to panic linked to DeepSeek, wiping out over $600 billion from its market capitalization. However, the long-term threat that DeepSeek’s success poses to Nvidia’s business model remains unclear.
For example, Citi analysts noted that access to advanced computing chips, like those manufactured by Nvidia, will continue to be a key barrier to entry in the AI market. Wedbush analyst Dan Ives described the chaos surrounding DeepSeek’s launch as a “buying opportunity.”
Nvidia is also heavily involved in former President Trump’s $500 billion “Stargate” AI infrastructure project.
Optimists for Nvidia have pointed out that DeepSeek still used its chips to train the model, albeit at a lower cost than previously thought possible.
