Why is the US in shock following the China DeepSeek launch?

The government and the business tycoon especially the big tech giants of the US are in great shock following the Chinese AI research lab DeepSeek released its open-source AI model, DeepSeek-R1, which has drawn significant attention in the tech world.

Shares of different US tech companies are losing value rapidly and there is an alarming situation in Silicon Valley, the global center of technology and innovation.

According to a paper authored by the Chinese AI research lab, the DeepSeek-R1 model outperforms cutting-edge models such as OpenAI’s o1 and Meta’s Llama AI models across multiple benchmarks. This is impressive, given that the model is also open-source, cost-effective, and requires significantly less computational power compared to its rivals.

Soon after the launch, DeepSeek becomes the most downloaded free app on Apple’s US App Store, displacing OpenAI’s ChatGPT.

Donald Trump’s statement:

President Trump in his reaction has stated that the DeepSeek release “should be a wake-up call for our industries that we need to be laser-focused on competing to win.”

He argued that 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.”

The development also comes against a background of a US government push to ban Chinese-owned TikTok in the United States or force its sale.

Nvidia stock down:

Nvidia is a technology company that makes chips, systems, and software that power things like artificial intelligence (AI), gaming, and graphics.

Soon after the launch of DeepSeek, Nvidia stock fell sharply and it lost nearly $US600 billion.

As of the close of trade on the US stock market on January 27, it was $US118.42. Compare that to just a few weeks ago on January 6, when it was $US149.43 — its highest-ever closing price.

Who is behind DeepSeek?

As per the news agency Reuters, DeepSeek is a Hangzhou-based startup whose controlling shareholder is Liang Wenfeng, co-founder of quantitative hedge fund High-Flyer, based on Chinese corporate records.

Liang’s fund announced in March 2023 on its official WeChat account that it was “starting again”, going beyond trading to concentrate resources on creating a “new and independent research group, to explore the essence of AGI” (Artificial General Intelligence). DeepSeek was created later that year.

ChatGPT makers OpenAI define AGI as autonomous systems that surpass humans in most economically valuable tasks.

It is unclear how much High-Flyer has invested in DeepSeek. High-Flyer has an office located in the same building as DeepSeek, and it also owns patents related to chip clusters used to train AI models, according to Chinese corporate records.

High-Flyer’s AI unit said on its official WeChat account in July 2022 that it owns and operates a cluster of 10,000 A100 chips.