DeepSeek, a Chinese artificial intelligence (AI) startup, made headlines worldwide after it topped app download charts and caused US tech stocks to sink.
In January, it released its latest model, DeepSeek R1, which it said rivalled technology developed by ChatGPT-maker OpenAI in its capabilities, while costing far less to create.
Its popularity and potential rattled investors, wiping billions of dollars off the market value of chip giant Nvidia – and called into question whether American firms would dominate the booming artificial intelligence (AI) market, as many assumed they would.
President Donald Trump described it as a “wake-up call” for US companies.
What is artificial intelligence?
To understand why DeepSeek has made such a stir, it helps to start with AI and its capability to make a computer seem like a person.
A machine uses the technology to learn and solve problems, typically by being trained on massive amounts of information and recognising patterns.
The end result is software that can have conversations like a person or predict people’s shopping habits.
In recent years, it has become best known as the tech behind chatbots such as ChatGPT – and DeepSeek – also known as generative AI.
These programs again learn from huge swathes of data, including online text and images, to be able to make new content.
But these tools can also create falsehoods and often repeat the biases contained within their training data.
Millions of people use tools such as ChatGPT to help them with everyday tasks like writing emails, summarising text, and answering questions – and others even use them to help with basic coding and studying.
What is DeepSeek?
DeepSeek is the name of a free AI-powered chatbot, which looks, feels and works very much like ChatGPT.
That means it’s used for many of the same tasks, though exactly how well it works compared to its rivals is up for debate.
It is reportedly as powerful as OpenAI’s o1 model – released at the end of last year – in tasks including mathematics and coding.
Like o1, R1 is a “reasoning” model. These models produce responses incrementally, simulating how humans reason through problems or ideas.
Deepseek says it has been able to do this cheaply – researchers behind it claim it cost $6m (£4.8m) to train, a fraction of the “over $100m” alluded to by OpenAI boss Sam Altman when discussing GPT-4.
It has also seemingly be able to minimise the impact of US restrictions on the most powerful chips reaching China.
DeepSeek’s founder reportedly built up a store of Nvidia A100 chips, which have been banned from export to China since September 2022. Some experts believe he paired these chips with cheaper, less sophisticated ones – ending up with a much more efficient process.
DeepSeek also uses less memory than its rivals, ultimately reducing the cost to perform tasks for users.
That combination of performance and lower cost helped DeepSeek’s AI assistant become the most-downloaded free app on Apple’s App Store when it was released in the US.
The same day, it was hit with “large-scale malicious attacks”, the company said, causing the company to temporary limit registrations.
Its website also experienced outages.
Like many other Chinese AI models – Baidu’s Ernie or Doubao by ByteDance – DeepSeek is trained to avoid politically sensitive questions.
When the BBC asked the app what happened at Tiananmen Square on 4 June 1989, DeepSeek did not give any details about the massacre, a taboo topic in China, which is subject to government censorship
Who is behind DeepSeek?
DeepSeek was founded in December 2023 by Liang Wenfeng, and released its first AI large language model the following year.
Not much is known about Mr Liang, who graduated from Zhejiang University with degrees in electronic information engineering and computer science. But he now finds himself in the international spotlight.
He was recently seen at a meeting hosted by China’s premier Li Qiang, reflecting DeepSeek’s growing prominence in the AI industry.
Unlike many American AI entrepreneurs who are from Silicon Valley, Mr Liang also has a background in finance.
He is the CEO of a hedge fund called High-Flyer, which uses AI to analyse financial data to make investment decisions – what is called quantitative trading. In 2019 High-Flyer became the first quant hedge fund in China to raise over 100 billion yuan ($13m).
In a speech he gave that year, Liang said, “If the US can develop its quantitative trading sector, why not China?”
In a rare interview last year, he said China’s AI sector “cannot remain a follower forever” of US AI development.
Asked why DeepSeek’s model surprised so many in Silicon Valley, Liang said: “Their surprise stems from seeing a Chinese company join their game as an innovator, not just a follower – which is what most Chinese firms are accustomed to.”
But it has drawn scrutiny from global leaders.
Australia has banned DeepSeek on government devices and systems, saying it poses a national security risk.
Several data protection authorities around the world have also asked DeepSeek to clarify how it handles personal information – which it stores on China-based servers.
Italy blocked DeepSeek’s app on 30 January and ordered the company to stop processing the personal information of its citizens over data protection concerns.
Why were US companies like Nvidia hit?
DeepSeek’s achievements undercut the belief that bigger budgets and top-tier chips are the only ways of advancing AI, a prospect which has created uncertainty about the future of high-performance chips.
“DeepSeek has proven that cutting-edge AI models can be developed with limited compute resources,” says Wei Sun, principal AI analyst at Counterpoint Research.
“In contrast, OpenAI, valued at $157 billion, faces scrutiny over its ability to maintain a dominant edge in innovation or justify its massive valuation and expenditures without delivering significant returns.”
DeepSeek’s apparently lower costs roiled financial markets on 27 January, leading the tech-heavy Nasdaq to fall more than 3% in a broad sell-off that included chip makers and data centres around the world.
Nvidia’s stock price plunged 17% on Monday before it began to recover on Tuesday.
The chip maker had been the most valuable company in the world, when measured by market capitalisation.
But it fell to third place after Apple and Microsoft on Monday, when its market value shrank to $2.9tn from $3.5tn, Forbes reported.
DeepSeek is a privately owned company, which means investors cannot buy shares of stock on any of the major exchanges.
How has China reacted to DeepSeek’s impact?
DeepSeek’s rise is a huge boost for the Chinese government, which has been seeking to build tech independent of the West.
While the Communist Party is yet to comment, Chinese state media was eager to note that Silicon Valley and Wall Street giants were “losing sleep” over DeepSeek, which was “overturning” the US stock market.
“In China, DeepSeek’s advances are being celebrated as a testament to the country’s growing technological prowess and self-reliance,” says Marina Zhang, an associate professor at the University of Technology Sydney.
“The company’s success is seen as a validation of China’s Innovation 2.0, a new era of homegrown technological leadership driven by a younger generation of entrepreneurs.”
But she also warned that this sentiment may also lead to “tech isolationism”.