The release of the latest model of Chinese AI chatbot DeepSeek, touted for its cost-efficiency and ability to run on less advanced chips than ChatGPT, has ignited debate about the evolving dynamics of the AI industry.
The AI has surged in popularity among US users since DeepSeek-R1 was released on 10 January, according to app data research firm Sensor Tower – leapfrogging rival ChatGPT to become the top-rated free application on Apple’s App Store in the US on Monday.
DeepSeek-R1 claims that its new “reasoning” model compares favourably with OpenAI’s o1 large language model, which is designed to answer maths and science questions with more accuracy than traditional LLMs.
The small Hangzhou startup, founded in 2023 by hedge fund leader Liang Wenfeng, also claims to have achieved significant advances in AI by optimising its models to operate efficiently on less advanced hardware.
This development means that not only can the firm’s models claim to be greener because they use less energy but, it also enables the firm to circumvent US export restrictions on advanced chips.
The Biden administration has since 2021 widened the scope of bans designed to stop these chips from being exported to China and used to train Chinese firms’ AI models.
Liang Wenfeng, DeepSeek
DeepSeek’s rapid advances in these areas also raise questions about the sustainability of current business models and the potential for increased competition from international players.
While major firms such as Microsoft, and Meta are spending tens of billions of dollars on millions of GPUs a year, DeepSeek’s researchers claim that DeepSeek V3 used Nvidia’s H800 chips and was trained at a cost of $5.5million.
Shifting power balance
As a result of the latest DeepSeek release, there was a decline in stock prices for major firms such as Nvidia, Microsoft, and Meta at the beginning of this week.
According to Nigel Green CEO of global financial advisory giant deVere Group, China’s technological advances, particularly in AI, are eroding the US’s ability to use tariffs as a tool to maintain global supremacy.
“The balance of power is shifting, and Washington must recognise that it can’t always dictate terms to Beijing as it once did. This new reality will have far-reaching consequences for investors and policymakers,” he said.
Green predicts that China’s AI breakthrough will escalate a global ‘AI arms race’ that threatens US tech dominance.
He says: “DeepSeek is going to challenge Silicon Valley’s leadership, disrupting the global tech landscape and reshaping the direction of the AI arms race.
“The launch of this innovation underscores a historic pivot in the balance of technological power.”
