January 28, 2025 - A new player in artificial intelligence, DeepSeek, has emerged from China, launching its R1 chatbot model and causing significant disruption in the tech sector.
The model, developed at a fraction of the cost of its competitors, has raised questions about the sustainability of heavy investments in AI by Western companies. DeepSeek reportedly spent only $5.6 million to develop its R1 model, compared to estimates of $100 million to $1 billion for similar models in the West.
The launch led to a 3.1% drop in the Nasdaq Composite, wiping over $1 trillion off global tech stocks. NVIDIA alone lost over $700 billion in market value as a result of the news, which has positioned Apple as the most valuable company in the U.S.
DeepSeek's model, which utilizes less powerful NVIDIA H800 chips, has topped app store charts in the U.S. and U.K., prompting investors to reassess their confidence in U.S.-led AI initiatives. The company’s approach challenges the traditional investment-heavy model, suggesting that effective AI can be developed with fewer resources.
The implications extend globally, affecting European and Asian markets, while experts highlight the potential democratization of AI through DeepSeek's open-source models.