Thus far, the US was thought to be the world leader in AI, controlling both the hardware aspects of the technology through companies like NVIDIA, and the software aspects through companies like OpenAI, Google and Microsoft. But all that seems to have changed over a weekend.
Chinese AI company DeepSeek has become the top app on the app stores in the US, pushing OpenAI to the second place. DeepSeek bills itself as an AI assistant, and its UI and UX seem to be heavily inspired by ChatGPT. But DeepSeek went viral over the last couple of days because people felt that it was delivering better answers — and at a cheaper price point — than ChatGPT.
It’s incredible that a Chinese AI company that no one had heard of until a month ago has leapfrogged OpenAI as the top app in the US. DeepSeek is based in Hangzhou in China, and was founded in 2023 by a hedge fund named High-Flyer. High-Flyer in turn was founded in 2015 by three engineers from Zhejiang University who began trading as students during the 2007–2008 financial crisis. The firm made use of machine learning to trade stocks, and in 2019 it established High-Flyer AI which was dedicated to research on AI algorithms and its basic applications. By 2021, all of High-Flyer’s strategies were using AI, making it an AI-focused fund. DeepSeek was founded in 2023 as an AI research lab, and has released a few AI models so far, but R1 is its most performant model.
DeepSeek’s R1 model had demonstrated results very similar to OpenAI’s o1 model, which is the most sophisticated model that OpenAI currently makes available to users. More impressively, DeepSeek’s API is priced at nearly 90 percent below the rates OpenAI charges, which could make it an attractive alternative to OpenAI for developers who’re integrating AI APIs into their products. Even more impressively, DeepSeek’s model reportedly cost only $6 million to train instead of the billions that OpenAI spent on training its models, and was trained on inferior chips compared to the state-of-the-art NVIDIA chips that OpenAI was using.
DeepSeek’s viral moment has caused tremors in the tech world. NVIDIA’s stock is down 10 percent in opening and has seen $350 billion of value wiped out, because DeepSeek showed that it wasn’t important to have access to millions of its chips to build powerful AI models. OpenAI has meanwhile scrambled and begun offering its latest model o3-mini model to its free tier users. There have been reports that there is consternation internally at Meta, which had purchased billions of dollars of GPUs, and seems to have been handily beaten by a Chinese model at a fraction of the cost. It remains to be seen if DeepSeek can establish itself as a long-term competitor to OpenAI, but with its app zooming to the top of the US app stores, and it causing a $350 billion drop in NVIDIA’s market cap, it seems to be well on its way to getting there.