China's DeepSeek AI dents US superiority

NEW YORK, Jan 28 (BBC): The speed at which the new Chinese AI app DeepSeek has shaken the technology industry, the markets and the bullish sense of American superiority in the field of artificial intelligence (AI) has been nothing short of stunning.

US President Donald Trump has called the rise of Chinese company DeepSeek "a wake-up call" for the US tech industry, after the emergence of its artificial intelligence (AI) model triggered shockwaves on Wall Street.

Venture capitalist Marc Andreessen may have said it best. "DeepSeek-R1 is AI's Sputnik moment," he posted to X on Sunday, referring to the satellite which kicked off the space race.

DeepSeek was the most downloaded free app on Apple's US App Store over the weekend. By Monday, the new AI chatbot had triggered a massive sell-off of major tech stocks which were in freefall as fears mounted over America's leadership in the sector.

Shares of AI chip designer and recent Wall Street darling Nvidia, for example, had plunged by 17% by the time US markets closed on Monday. Or to put it in even starker terms, it lost nearly $600bn in market value which, according to Bloomberg, is the biggest drop in the history of the US stock market.

This extraordinary, historic spooking can largely be attributed to something as simple as cost. And a claim by DeepSeek's developers which prompted serious questions in Silicon Valley.

While ChatGPT-maker OpenAI has been haemorrhaging money - spending $5bn last year alone - DeepSeek's developers say it built this latest model for a mere $5.6m.

That is a tiny fraction of the cost that AI giants like OpenAI, Google, and Anthropic have relied on to develop their own models.

As this dramatic moment for the sector played out, there was a palpable silence in many corners of Silicon Valley when I contacted those who are usually happy to talk. Many observers, investors, and analysts appeared stunned.

Some wondered if this marked a buying opportunity. Others questioned the information DeepSeek was providing.

"I still think the truth is below the surface when it comes to actually what's going on," veteran analyst Gene Munster told me on Monday. He questioned the financials DeepSeek is citing, and wondered if the startup was being subsidised or whether its numbers were correct.

The chatbot is "surprisingly good, which just makes it hard to believe", he said. Regardless, DeepSeek's sudden arrival is a "flex" by China and a "black eye for US tech," to use his own words.

It was just last week, after all, that OpenAI's Sam Altman and Oracle's Larry Ellison joined President Donald Trump for a news conference that really could have been a press release. The event represented peak American bullishness on AI.

They announced Stargate, a joint venture that promises up to $500bn in private investment for AI infrastructure: data centres in Texas and beyond, along with a promised 100,000 new jobs.

The US seemed to think its abundant data centers and control over the highest-end chips gave it a commanding lead in AI, despite China's dominance in rare-earth metals and engineering talent.

Some have even seen it as a foregone conclusion that America would dominate the AI race, despite some high-profile warnings from top executives who said the country's advantages should not be taken for granted.

The US may still go on to command the sector, but there is a sense that DeepSeek has shaken some of that swagger.

For now, the future of semiconductor giants like Nvidia remains unclear. DeepSeek says its model was developed with existing technology along with open source software that can be used and shared by anybody for free.