Chinese AI App DeepSeek Overtakes ChatGPT, Sparks US Stock Market Selloff

The surge in popularity of the Chinese artificial intelligence (AI) app DeepSeek has triggered a considerable selloff in shares of major tech companies. DeepSeek has surpassed competitors like ChatGPT to become the top-rated free app on Apple’s App Store, causing a ripple effect in the stock market. Nvidia, Microsoft, and Meta were all set to open lower on Monday, and the development also impacted European share prices.

DeepSeek Challenges US Dominance in AI

Since its launch, DeepSeek has grown rapidly, challenging the widely held belief that the United States is the unassailable leader in AI. The app is powered by the open-source DeepSeek-V3 model, which its researchers claim was developed for less than $6 million—significantly less than the billions spent by rivals. However, this claim has been disputed by others in the AI space.

Build anything with DeepSeek-R1, here's how… pic.twitter.com/GcDUVxhDpq

— Julian Goldie SEO (@JulianGoldieSEO) January 26, 2025

US Restrictions and Chinese Innovation

DeepSeek’s emergence comes at a time when the US is restricting the sale of advanced chip technology to China. To continue their work without a steady supply of imported advanced chips, Chinese AI developers have shared their work with each other and experimented with new approaches to the technology.

This has resulted in AI models that require far less computing power and cost much less than previously thought possible, potentially upending the industry, reports The BBC.

Introducing DeepSeek App!

Powered by world-class DeepSeek-V3
FREE to use with seamless interaction
Now officially available on App Store & Google Play & Major Android markets
Download now: https://t.co/DIwqqkbK93

1/3 pic.twitter.com/QorHk2lEwj

— DeepSeek (@deepseek_ai) January 15, 2025

Performance on Par with OpenAI’s Latest Models

After the launch of DeepSeek-R1 earlier this month, the company boasted of “performance on par with” one of OpenAI’s latest models when used for tasks such as math, coding, and natural language reasoning.

Silicon Valley venture capitalist and Donald Trump advisor Marc Andreessen described DeepSeek-R1 as “AI’s Sputnik moment,” referencing the satellite launched by the Soviet Union in 1957. At the time, the US was considered to have been caught off-guard by their rival’s technological achievement.

Market Reactions and Expert Opinions

DeepSeek’s popularity has startled markets. ASML, the Dutch chip equipment maker, saw its share price tumble by more than 10%, while shares in Siemens Energy, which makes hardware related to AI, plunged by 21%.

“This idea of a low-cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,” said Fiona Cincotta, senior market analyst at City Index. “So if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure.”

Singapore-based technology equity advisor Vey-Sern Ling told the BBC that DeepSeek could “potentially derail the investment case for the entire AI supply chain.”

However, Wall Street banking giant Citi cautioned that while DeepSeek could challenge the dominant positions of American companies such as OpenAI, issues faced by Chinese firms could hamper their development. “We estimate that in an inevitably more restrictive environment, US access to more advanced chips is an advantage,” its analysts said in a report.

The Stargate Project: A $500 Billion Investment in AI Infrastructure

In response to the growing competition, a consortium of US tech firms and foreign investors announced The Stargate Project last week. The company is investing $500 billion into AI infrastructure in Texas, aiming to bolster the US’s position in the AI race.

DeepSeek’s rise has undoubtedly shaken the tech world, prompting a reevaluation of the global AI landscape and the investments required to stay ahead.

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