If you’ve come across the name DeepSeek and that little blue whale logo in your feed today and are wondering WTF is going on, you’re not alone.
Chinese AI start-up DeepSeek has seemingly taken social media by storm and rocked global markets this week, causing tech giants like Nvidia to lose almost US$600 billion (AUD$900 billion) in a day.
But, bigger picture, DeepSeek could be ready to shake things up in the AI arena.
Better settle in, because we’ve got a lot to cover here.
What is DeepSeek?
Since players like ChatGPT emerged on the scene in late early 2022, there’s been a pretty massive hype around AI technologies and the companies involved in its development.
This has spurred stocks to eye-watering new highs. Chipmaker Nvidia, for example, has seen its stock price surge over 900 per cent (!!!) since 2023.
Other tech giants like Google, Meta, and Microsoft have also flagged they’re all in on this next big trend — we’re talking billion dollar commitments here. And who can forget Stargate, Trump’s new joint venture announced last week with Oracle, SoftBank, and OpenAI to build out data centres and AI infrastructure in the US.
Trying going a day without ~someone~ mentioning AI in some way. Source: BlackJack3D / Getty Images
Enter DeepSeek, a Chinese tech startup founded by Liang Wenfeng that’s been quietly doing its thing since 2023.
It began attracting more attention in the AI industry last month when it unveiled its AI model called R1 that’s claimed to be on par with OpenAI’s o1 model, which was released to ChatGPT users just last month.
But the true chaos started late last week.
As reported by WIRED, a paper authored by the company — published on the same day as President Donald Trump’s inauguration — suggested R1 beats industry leading models on several benchmarks, including cost of development as it took two months and less than US$6 million (AUD$9 million) to develop the model.
Some observers caution this is probably an underestimate but if it’s true, this could soon be giving Western AI giants a run for their money.
Another twist in this whole saga is that DeepSeek’s AI tech might be able to do all this without requiring the massive amounts of energy, chips, and cooling systems previously thought necessary to run cutting-edge AI models.
DeepSeek’s AI tech reportedly uses less energy than popular AI models like ChatGPT, meaning the strain on the environment is significantly reduced.
“The fact that this technology is supposed to take less energy and is more cost-effective than US-based models has US technology investors very concerned,” remarked Jay Woods, the chief global strategist at Freedom Capital Markets, in a market note, per Business Insider.
What does this have to do with stock markets?
It didn’t take long for DeepSeek’s announcement to spark a storm of debate over the weekend. US tech stocks have been talking a big game about its investment in AI, but DeepSeek’s rapid development called into question whether all that spending is really paying off.
This hit the markets hard on Monday and a massive sell-off saw investors dump stocks in global tech companies.
Nvidia saw its biggest drop since March 2020, losing over US$600 billion in market value in just a couple of days.
The Nasdaq index — which includes the likes of Apple, Microsoft, and Amazon — dropped by more than three per cent, wiping out around US$1 trillion (AUD$1.5 trillion) in value.
Yup, we’re talking some pretty big numbers here.
And what’s this about an app?
DeepSeek’s latest AI chatbot also quickly exploded onto the scene, taking the number one spot as the most downloaded free app on Apple’s App Store as people got curious about what all the fuss is about.
The app is designed “to answer your questions and enhance your life efficiently”, according to its description on the App Store, and initial reviews seem pretty solid.
“Honestly amazing. Really appreciate that you guys made this and opened it up to us,” wrote one user.
“Absolutely amazed at this AI model. Its reinforced learning feature is a game changer,” said another user.
A number of reviewers also praised its efficiency, accuracy, speed and reliability.
Amid the surge in popularity, the app was even hit by a cyber-attack, as reported by Reuters, which forced the company to temporarily limit user activity and registrations. It has since restored operations.
Here’s where things get tricky…
The story of DeepSeek goes beyond stock markets and technology, given what we’ve seen with the US and China’s growing tensions.
As pointed out by venture capitalist and Trump tech adviser Marc Andreessen on x (formerly Twitter), DeepSeek’s breakthrough could be “AI’s Sputnik moment.” If that sounds familiar, it’s because it’s a reference to the 1957 launch of Sputnik, the satellite that kicked off the space race between the US and the USSR during the Cold War in the 1950s.
Andreessen’s point? The US might be at risk of losing its lead in AI, given some lawmakers and tech leaders are already asking whether current regulations will help or hurt America’s competitive edge.
As reported by the Australian Financial Review, the attention on DeepSeek could also threaten a key US foreign policy strategy in recent years.
“The technology innovation is real, but the timing of the release is political in nature,” explained Gregory Allen, director of the Wadhwani AI Centre at the Centre for Strategic and International Studies.
Better brace for plenty of conversations around the future of AI. Source: Khanchit Khirisutchalual / Getty Images
He drew comparisons to an incident in 2023 that saw US-sanctioned Chinese Huawei release a new phone in the midst of diplomatic discussions over Biden’s administration export controls.
“Trying to show that the export controls are futile or counterproductive is a really important goal of Chinese foreign policy right now,” Allen said, per the AFR.
This is looking like it’s going to be a pretty wild ride — we’ll keep you posted.
Lead image source: Justin Sullivan/Getty Images
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