Here’s how DeepSeek is making US Tech Stocks Sweat, Big Time!
DeepSeek is a rising Chinese artificial intelligence (AI) company based in Hangzhou, founded as a university startup just a few years ago. Its mission? To achieve artificial general intelligence (AGI) — a human-level intelligence that no tech company has reached till now.
While AGI is still a work in progress for DeepSeek, the company has taken an innovative and cost-effective approach to building its AI model. This strategy has resulted in a system that operates at a fraction of the cost of its US counterparts, making it stand out in a competitive industry.
One factor driving this efficiency may be the challenges Chinese computer scientists face due to restrictions on access to high-performance chips imposed by the US government. These limitations have encouraged the team at DeepSeek to innovate and optimize their resources, carving out a unique space for themselves in the AI world.
What’s the Buzz About the R1 Model?
If you’ve been hearing a lot about DeepSeek’s R1 model lately, you’re not alone. It’s the latest AI model turning heads, and for good reason. Often compared to OpenAI’s O1 model (the one ChatGPT users got in December), R1 has quickly made its mark. In fact, it became the most downloaded free app on Apple’s App Store this week in the UK and beyond.
So, What Makes R1 Special?
With so many AI models from big players like OpenAI, Google, and Meta, what makes R1 stand out? The answer lies in its innovative design. Unlike traditional models, R1 boasts a completely reimagined internal architecture — one that’s far more efficient. It uses less memory and drastically cuts costs for every interaction, whether it’s solving complex problems or answering questions.
What’s really turning heads is how well R1 handles challenging tasks in math and coding. Researchers are impressed by its ability to tackle these with ease. And here’s the game-changer — R1 delivers results comparable to its competitors while consuming just a fraction of the computing power.
DeepSeek claims it developed R1 in just two months, spending under $6 million (£4.8 million). Even if some critics think the actual cost might be slightly higher, it’s still a fraction of the billions Silicon Valley companies pour into their AI models. Plus, it’s not just cheaper to create — it’s significantly more affordable to operate, making R1 a true disruptor in the AI landscape.
How DeepSeek Shook Up the US Tech Industry in One Weekend
Over the weekend, DeepSeek’s chatbot performance was all anyone could talk about — and it shook things up in a big way. Major US tech companies saw their stock values drop by hundreds of billions as the news spread.
Why the sudden drop? Timing plays a big role here. Just recently, US tech giants pledged massive investments into AI, pouring billions into building the infrastructure and energy systems they thought were essential for reaching artificial general intelligence (AGI).
But here’s where DeepSeek comes in and throws a wrench into that plan. Their innovative, cost-effective approach to AI is raising a major question: does AGI really need to come with a price tag in the billions? Investors are starting to wonder, and the market’s reacting.
To put it in perspective, Adam Kobeissi, founder of market analysis newsletter The Kobeissi Letter, tweeted on Monday: “OpenAI was founded 10 years ago, has 4,500 employees, and has raised $6.6 billion. DeepSeek was founded less than 2 years ago, has 200 employees, and developed its tech for less than $10 million.”
DeepSeek’s rise is a stark reminder of how quickly the tech world can change. It’s a wake-up call for those betting on expensive, resource-heavy strategies. The AI race just got a whole lot more exciting.
And for the US government, DeepSeek’s success has sparked some questions about its efforts to contain China’s AI advances — especially with its restrictions on high-end chip exports.
It was a tough day for Nvidia, a company that has thrived during the AI boom. Once focused on graphics cards for video games, Nvidia evolved into the go-to supplier of chips powering the AI industry’s insatiable demand. Often compared to a pickaxe and bucket supplier during the California gold rush, Nvidia capitalized on being in the right place at the right time. But with tech companies now turning their attention to DeepSeek, questions are arising about whether Nvidia’s tools remain as essential. This growing uncertainty led to a staggering $600 billion drop in its market value on Monday.
Google’s parent company, Alphabet, dropped 4.03%, and Microsoft saw a 2.14% dip in stock prices on Monday. The only winners that day? Apple and Amazon, which managed to finish higher.
Is China Now Leading the AI Race?
It’s tempting to say that China is pulling ahead in the AI race with DeepSeek’s impressive R1 model, but the truth is a bit more complex.
While many tech analysts agree that DeepSeek-R1 rivals ChatGPT — possibly even outshining it in certain areas — the AI landscape is evolving at lightning speed.
Take OpenAI CEO Sam Altman, for instance. Earlier this month, he announced that OpenAI would be launching its latest reasoning AI model, o3 mini, in just a few weeks, based on user feedback.
On Monday, Altman gave credit where it was due, calling DeepSeek-R1 “impressive,” but he stood by OpenAI’s strategy of focusing on greater computing power.
“We will obviously deliver much better models, and it’s legit invigorating to have a new competitor! We will pull up some releases,” Altman shared on X.
So, while DeepSeek’s breakthrough is undeniably exciting, the AI race is far from over, and the US tech giants aren’t backing down.
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