A new Chinese AI chatbot is rivaling the US already
Donald Trump has issued a warning after a new Chinese artificial intelligence (AI) app brought havoc upon the US stock market.
The release of chatbot DeepSeek on January 20 has seen chip-maker Nvidia’s stock price fall by almost $600 billion.
Now, the US president has declared it a ‘wake-up call’ for American companies who must focus on ‘competing to win’.
It comes as Donald Trump last week confirmed plans for a $500 billion AI project called Stargate, backed by tech giants including Microsoft, Oracle, OpenAI and, somewhat ironically now, Nvidia.
Trump claimed Stargate would further cement the US’ position as AI world leaders, which has seemingly been challenged already.
What is DeepSeek?
Similar to ChatGPT, Google’s Gemini and others, DeepSeek is an AI chatbot app that can answer question and queries.
The company was launched in 2023 by entrepreneur Liang Wenfeng, the co-founder of quantitative hedge fund High-Flyer.
DeepSeek released to app stores on January 20 and has already flown to the top of download charts in the US, UK and elsewhere.
While DeepSeek fails to answer certain politically sensitive questions, developers say its general performance is on a par with its high-profile US rivals.
DeepSeek released to app stores on January 20 (Justin Sullivan/Getty Images)
How does DeepSeek work?
Powered by the open source DeepSeek-V3 model, its researchers claim the AI model was trained for around $6 million.
This is significantly less than the billions that have been spent by rivals.
What’s more, the Chinese company claims it uses eight times less the amount of specialized chips to do so.
DeepSeek was supposedly trained on 2,000 GPU chips compared to an estimated 16,000 for leading models.
OpenAI chief Sam Altman praised the business for its ‘impressive model, particularly around what they’re able to deliver for the price’, though he added that OpenAI would ‘obviously deliver much better models’ moving forward.
Chip export ban
Back in 2022, the US restricted exports of these all-important chips to China, from companies including Nvidia and AMD.
The government claimed it was in an effort to mitigate national security concerns.
However, Wenfeng High-Flyer is said to have amassed a stockpile of Nvidia high-performance processor chips that are used to run AI systems.
Now, DeepSeek says its recent AI models have been built using lower-performing Nvidia chips not banned in China.
Not everyone is convinced though, with tech billionaire Elon Musk among those casting doubt.
Responding to a post which claimed DeepSeek actually has around ‘50,000 Nvidia chips that have now been banned from export to China,’ the Tesla CEO said: “Obviously.”
Why did DeepSeek cause Nvidia to lose market shares?
Being a new rival to ChatGPT is not enough in itself to upend the US stock market, but the apparent low cost for its development – and its use of chips not banned in China – has been.
Nvidia appears to have been hit the worst as its stock price plunged 17 percent in the space of one day, tumbling to $2.9 trillion from $3.5 trillion, as per Forbes.
The blow saw the chip maker slip from most valuable company in the world by market capitalization to third on, behind Apple and Microsoft.
So, DeepSeek has shown the US may not be the dominant market leader in AI many thought it to be, and that cutting edge AI models can be built and trained for less than first thought.
DeepSeek CEO Liang said in a July 2024 interview with The China Academy he was surprised by the reaction to a previous version of his AI model.
“We didn’t expect pricing to be such a sensitive issue,” he said. “We were simply following our own pace, calculating costs, and setting prices accordingly.”
