Silicon Valley rattled by China’s low-cost Deepseek AI

Start-up disrupted AI landscape, showing that cost-effective AI models can rival larger systems, raising questions about big investments

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DeepSeek’s AI breakthrough challenges big tech, causing a market shakeup and hitting Nvidia and ASML shares, as investors reassess AI investment strategies. Photo: Reuters

Published: 12:07am, 28 Jan 2025Updated: 3:53am, 28 Jan 2025

Fears that the AI gold rush could be under threat rocked Wall Street on Monday following the emergence of a popular ChatGPT-like model from China, triggering predictions of turmoil for Silicon Valley and accusations of cheating.

Last week’s release of the latest DeepSeek model initially received limited attention, overshadowed by the inauguration of US President Donald Trump that took place on the same day.

However, over the weekend, the Chinese artificial intelligence start-up’s chatbot surged to become the most downloaded free app on Apple’s US App Store, displacing OpenAI’s ChatGPT.

What truly rattled the industry was DeepSeek’s claim that it developed its latest model, the R1, at a fraction of the cost major companies are currently investing in AI development, primarily on expensive Nvidia chips and software.

This development is particularly significant given that the artificial intelligence boom, ignited by ChatGPT’s release in late 2022, has propelled Nvidia to become one of the world’s most valuable companies.

The news sent shock waves through the US tech sector, exposing a critical concern: should tech giants continue pouring hundreds of billions into AI investment when a Chinese company can produce a comparable model so economically?