Global tech stocks tumbled in late January as hype around DeepSeek snowballed
DeepSeek’s emergence may offer a counterpoint to the widespread belief that the future of AI will require ever-increasing amounts of power and energy to develop.
Global technology stocks tumbled in late January as hype around DeepSeek’s innovation snowballed and investors began to digest the implications for its U.S.-based rivals and their hardware suppliers.
What exactly is DeepSeek?
DeepSeek was founded in 2023 by Liang Wenfeng, the chief of AI-driven quant hedge fund High-Flyer. The company develops AI models that are open-source, meaning the developer community at large can inspect and improve the software. Its mobile app surged to the top of the iPhone download charts in the U.S. after its release in early January.
How does DeepSeek R1 compare to OpenAI or Meta AI?
DeepSeek says R1 is near or better than rival models in several leading benchmarks such as AIME 2024 for mathematical tasks, MMLU for general knowledge and AlpacaEval 2.0 for question-and-answer performance. It also ranks among the top performers on a UC Berkeley-affiliated leaderboard called Chatbot Arena.
What’s raising alarm in the U.S.?
Washington has banned the export of high-end technologies like GPU semiconductors to China, in a bid to stall the country’s advances in AI, the key frontier in the U.S.-China contest for tech supremacy. But DeepSeek’s progress suggests Chinese AI engineers have worked their way around the restrictions, focusing on greater efficiency with limited resources. While it remains unclear how much advanced AI-training hardware DeepSeek has had access to, the company’s demonstrated enough to suggest the trade restrictions have not been entirely effective in stymieing China’s progress.
When did DeepSeek spark global interest?
The AI developer has been closely watched since the release of its earliest model in 2023. Then in November, it gave the world a glimpse of its DeepSeek R1 reasoning model, designed to mimic human thinking. That model underpins its mobile chatbot app, which together with the web interface in January rocketed to global renown as a much cheaper OpenAI alternative, with investor Marc Andreessen calling it “AI’s Sputnik moment.”
The DeepSeek mobile app was downloaded 1.6 million times by Jan. 25 and ranked No. 1 in iPhone app stores in Australia, Canada, China, Singapore, the U.S. and the U.K., according to data from market tracker App Figures.
Who is DeepSeek’s founder?
Born in Guangdong in 1985, Liang received bachelor’s and masters’ degrees in electronic and information engineering from Zhejiang University. He founded DeepSeek with 10 million yuan (US$1.4 million) in registered capital, according to company database Tianyancha.
The bottleneck for further advances is not more fundraising, Liang said in an interview with Chinese outlet 36kr, but U.S. restrictions on access to the best chips. Most of his top researchers were fresh graduates from top Chinese universities, he said, stressing the need for China to develop its own domestic ecosystem akin to the one built around Nvidia and its AI chips.
“More investment does not necessarily lead to more innovation. Otherwise, large companies would take over all innovation,” Liang said.
Where does DeepSeek stand in China’s AI landscape?
Because DeepSeek’s models are more affordable, it’s already played a role in helping drive down costs for AI developers in China, where the bigger players have engaged in a price war that’s seen successive waves of price cuts over the past year and a half.
What are the implications for the global AI marketplace?
That roiled global stock markets as investors sold off companies like Nvidia Corp. and ASML Holding NV that have benefited from booming demand for AI services. Shares in Chinese names linked to DeepSeek, such as Iflytek Co., climbed.
Already, developers around the world are experimenting with DeepSeek’s software and looking to build tools with it. That could quicken the adoption of advanced AI reasoning models — while also potentially touching off additional concern about the need for guardrails around their use. DeepSeek’s advances may hasten regulation to control how AI is developed.
What are DeepSeek’s shortcomings?
DeepSeek’s cloud infrastructure is likely to be tested by its sudden popularity. The company briefly experienced a major outage on Jan. 27 and will have to manage even more traffic as new and returning users pour more queries into its chatbot.
With assistance from Luz Ding, Zheping Huang, Claire Che, Ville Heiskanen and Mayumi Negishi