US President Donald Trump called the rise of Chinese tech company DeepSeek "a wake-up call" for the US tech industry. DeepSeek's new AI model, R1, has created shockwaves on Wall Street. As a result, major US tech firms experienced significant losses. For instance, Nvidia, a leading chipmaker, lost nearly $600 billion (£482 billion) in market value. What stands out about DeepSeek is its claim that the R1 model was developed for just $6 million (£4.2 million). Compared to the billions spent by its rivals, this low cost raises serious questions about the future of US dominance in AI. Within just a week of its launch, DeepSeek became the most downloaded free app in the US.

Trump's Reaction

Meanwhile, Trump downplayed concerns about China’s AI progress. On Air Force One, he said, "If you could do it cheaper, if you could do it [for] less [and] get to the same end result. I think that's a good thing for us." Additionally, he expressed confidence that the US would remain a leader in the field.

China’s AI Advancements

Despite US restrictions on advanced chip exports to China, Chinese developers have made significant progress. To address these challenges, they collaborated and explored new techniques. As a result, they created AI models that require less computing power. This shift reduced costs dramatically, potentially disrupting the entire industry. For example, DeepSeek claims its model needs only 2,000 specialized chips, whereas leading models typically require 16,000. However, some critics, including Elon Musk, have questioned these claims. Musk even hinted that DeepSeek might have access to banned Nvidia chips.

Global Market Reactions

Consequently, DeepSeek’s emergence has shaken global markets. Shares in Japanese AI-related firms, such as Advantest and Softbank, fell sharply. In fact, Japan's Nikkei 225 index dropped by 1%. At the same time, several Asian markets, including China and South Korea, remained closed for the Lunar New Year.

Mixed Reactions from Experts

DeepSeek’s technology has drawn both praise and skepticism. For example, OpenAI CEO Sam Altman described it as "an impressive model, particularly around what they're able to deliver for the price." However, he emphasized that OpenAI would still deliver superior models in the future. Similarly, Marina Zhang, a professor at the University of Technology Sydney, highlighted how DeepSeek demonstrates that software efficiency can overcome hardware limitations. On the other hand, critics remain doubtful about some of the company’s claims.

About the Founder

DeepSeek was founded in 2023 by Liang Wenfeng in Hangzhou, China. The 40-year-old, who also established a hedge fund backing the company, has become a key figure in AI innovation. In a 2024 interview, Liang expressed surprise at the reaction to his model. "We didn't expect pricing to be such a sensitive issue," he said.

The Future of AI

Moving forward, DeepSeek’s R1 model could reshape AI development. Its low cost may encourage more companies to adopt AI technologies. Consequently, this could accelerate the growth of the AI market. However, the competition between the US and China is expected to intensify. Both nations are now racing to secure leadership in the future of AI.