Following the release of a well-known ChatGPT-like model from China, US President Donald Trump referred to it as a “wake-up call” for Silicon Valley, which shook Wall Street on Monday amid fears of upheaval in the AI gold rush.
The initial attention that the most recent DeepSeek model received received was initially stifled by Trump’s inauguration on the same day.
However, over the weekend, the Chinese artificial intelligence startup’s chatbot surged to become the most downloaded free app on Apple’s US App Store, displacing OpenAI’s ChatGPT.
DeepSeek’s claim that it produced its most recent model, the R1, was truly unsettling, primarily because of the price of expensive Nvidia chips and software being used to develop AI, stung the industry.
The development is significant given the AI boom, ignited by ChatGPT’s release in late 2022, has propelled Nvidia to become one of the world’s most valuable companies.
When a Chinese company claims to be able to create a comparable model for such a low cost, the news raised a crucial issue for the US tech sector: should tech giants continue to invest hundreds of billions of dollars in AI investment?
Washington’s apparent advances, which allegedly included maintaining US technological dominance, were a poke in the eye at DeepSeek.
Trump quickly responded on Monday, saying that the DeepSeek report “should serve as a wake-up call for our industries that we need to be relentlessly focused on competing to win.”
He argued it could be a “positive” for US tech giants, adding: “instead of spending billions and billions, you’ll spend less, and you’ll come up with hopefully the same solution”.
In a post on X, OpenAI CEO Sam Altman claimed that having a new rival was “legitimately invigorating.”
He called DeepSeek’s R1 “an impressive model, particularly around what they’re able to deliver for the price”, and pledged to speed up some OpenAI releases.
The development comes in response to the US government’s efforts to halt Chinese-owned TikTok’s sales or to close the company.
David Sacks, Trump’s AI advisor and prominent tech investor, said DeepSeek’s success justified the White House’s decision to reverse executive orders, issued under Joe Biden, that established safety standards for AI development.
Without any guarantee that China would follow suit, the regulations, Sacks wrote on X, “would have severely damaged American AI companies.”
Adam Kovacevich, CEO of the tech industry trade group Chamber of Progress, echoed the sentiment: “Now the top AI concern has to be ensuring (the United States) wins”.
In response to the Soviet Union’s 1957 launch of Earth’s first artificial satellite, which shocked the Western world, tech investor and Trump ally Marc Andreessen declared, “Deepseek R1 is AI’s Sputnik moment.”
In a note to clients, Kathleen Brooks, research director at XTB, warned that “the economics of AI will be turned on its head if China is quickly catching up to the US in the AI race.”
Prior to the start of the markets, Satya Nadella, the CEO of Microsoft, took to social media to briskly argue that less expensive AI was beneficial for everyone.
But last week at the World Economic Forum in Davos, Nadella warned: “We should take the developments out of China very, very seriously”.
Australia’s Science Minister Ed Husic raised privacy concerns, urging users to think carefully before downloading the chatbot.
“There are a lot of questions that will need to be answered in time on quality, consumer preferences, data and privacy management”, Husic told national broadcaster ABC.
“That would be very carefully my position. These type of issues need to be weighed up carefully”.
Microsoft, an eager adopter of generative AI, plans to invest $80 billion in AI this year, while Meta announced at least $60 billion in investments on Friday.
– ‘ Outplayed ‘ –
Nvidia’s stock dropped a staggering 17 percent on Monday, accounting for the majority of that investment.
The situation is particularly remarkable since DeepSeek, as a Chinese company, lacks easy access to Nvidia’s state-of-the-art chips after the US government placed export restrictions on them.
The export controls are “driving startups like DeepSeek to innovate in ways that prioritize efficiency, resource-pooling, and collaboration”, wrote the MIT Technology Review.
Elon Musk, who has heavily invested in Nvidia chips for his business xAI, claims DeepSeek has allegedly accessed banned H100 chips in secret, a claim made by ScaleAI, a well-known Silicon Valley startup supported by Amazon and Meta.
However, according to Hong Kong-based investor Jen Zhu Scott, these accusations “sound like a rich kids team got outplayed by a poor kids team.”
In a statement, Nvidia said DeepSeek’s technology was “fully export control compliant”.
Source: Channels TV
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