Chinese AI app DeepSeek shakes up US tech market

DeepSeek, an AI-powered chatbot by a Chinese company, has become the most downloaded free app on Apple's store in the US since its launch in January.

The app's rapid rise in popularity and its lower development cost compared to US-based AI companies have caused uncertainty in financial markets.

What is DeepSeek?

DeepSeek is a Chinese artificial intelligence company based in Hangzhou. Founded in July 2023, its popular chatbot app launched in the US on January 10, 2024.

The app functions like ChatGPT, answering user questions and assisting with various tasks. Users have praised it for adding personality to writing, though it avoids politically sensitive topics, such as the Tiananmen Square incident.

The company was founded by Liang Wenfeng, a 40-year-old engineering graduate who previously launched a hedge fund. He built DeepSeek using a stockpile of Nvidia A100 chips paired with cheaper alternatives, significantly reducing costs.

DeepSeek claims its AI models rival top US models at a fraction of the cost. While US companies spend billions, DeepSeek's app was reportedly developed for just $6 million.

Since its release, the free app has topped Apple's download charts in the US, though some users have reported issues signing up.

DeepSeek's success has caused concern for US companies like Nvidia, known for producing high-performance AI chips. On January 27, Nvidia's stock dropped 17 per cent, losing nearly $600 billion in value—the biggest one-day loss for any company in US history.

DeepSeek's use of cheaper chips challenges the belief that only expensive, advanced chips can drive AI progress, creating uncertainty about the future of the AI market.