DeepSeek has soared to the top of Apple’s App Store in the U.S., shaking global confidence in the long-held belief that Silicon Valley’s AI dominance will continue.
A Chinese-developed AI app, powered by the DeepSeek-V3 model, has taken the U.S. by storm both as disruptor of ChatGPT’s dominance as well as dilutor of Trump Administration’s new $500-billion AI venture StarGate.
Developed by a little-known startup in Hangzhou, China, DeepSeek-V3 is an open-source model that is being acknowledged widely within the Silicon Valley as a potential rival to the most sophisticated AI systems unveiled recently, for both its efficiency and cost-effectiveness, with training costs reportedly under $6 million compared to the billions spent on American AI models. DeepSeek claims that its latest R1 model is 20 to 50 times cheaper to use than OpenAI o1 model.
Crucial to the contention is two-fold — despite U.S. export controls restricting China’s access to advanced semiconductor chips since 2021, DeepSeek researchers successfully trained their model using less powerful Nvidia’s H800 chips, to bypass trade restrictions. Secondly, DeepSeek-V3’s open-source report has validated the model’s parameters, forcing the AI tech honchos to agree on its innovative solutions, with some experts suggesting that it might outperform them in certain areas.
READ: China disrupts AI market with DeepSeek: A better, cheaper version of ChatGPT? (January 27, 2025)
In fact, China’s AI rush met with its own record of failures. Soon after US restrictions on supply of advanced chips to China, the scramble to create their own chatbots forced Chinese search engine giant Baidu take lead and release the first Chinese ChatGPT equivalent that met with widespread disappointment. Next followed DeepSeek, founded in 2023, that emerged as a main contender and disruptor of AI supremacy by some U.S. companies, especially given the stark contrast in development costs.
According to state news agency Xinhua, the day DeepSeek-R1 was released to the public (Jan 20, 2025), its founder Liang Wenfeng attended a closed-door symposium for experts hosted by Chinese premier Li Qiang, indicating the sensitive essence of the development. Liang, also a co-founder of quantitative hedge fund 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, reports Reuters citing Chinese corporate records. In July 2022, High-Flyer’s AI unit said on its official WeChat account that it owns and operates a cluster of 10,000 A100 chips, surmising DeepSeek’s long journey.
DeepSeek has soared to the top of Apple’s App Store in the U.S., shaking global confidence in the long-held belief that Silicon Valley’s AI dominance will continue to dictate future demand and shape supply chains, from chipmakers to data centers. Unsurprisingly, Nvidia, whose chips are integral to powering AI applications, saw its stock plummet by 15% on Monday (Jan 27), triggering a broader downturn across U.S. markets.
Now that the US dominance in AI is disrupted, tech honchos in Silicon Valley are up in arms. Leading the tirade against the Chinese firm, Tesla CEO Elon Musk, who has extensive knowledge of building AI data centers for his start-up xAI, suggested that DeepSeek may possess around 50,000 NVIDIA Hopper GPUs, as opposed to the 10,000 A100s it claims to have.
Even Alexandr Wang, the billionaire CEO of Scale AI, held the view that DeepSeek likely has about 50,000 NVIDIA H100s. Musk and Wang both brush aside DeepSeek’s claims on the true number of GPUs due to US export controls currently in place. On another front, analysts at Cantor suspect that DeepSeek might be understating the extent of their computing power.
New Front in AI Race
DeepSeek’s meteoric rise is not just a triumph of innovation but a symbol of the shifting balance of power in the AI industry. As Chinese companies continue to innovate despite sanctions, the global AI landscape is becoming increasingly fragmented, with the U.S. and China vying for dominance.
What began as a race for technological supremacy is rapidly evolving into a broader contest for geopolitical influence, with AI at its core. For now, DeepSeek has forced the world to reckon with the reality that Silicon Valley’s hold on the future of AI is no longer guaranteed.