Chinese AI chatbot DeepSeek sparks market turmoil
Peter Hoskins & Imran Rahman-Jones
Business and technology reporters
Shares in major US technology firms have fallen steeply in value after the sudden emergence of a low-cost chatbot built by a Chinese artificial intelligence (AI) firm.
The DeepSeek app, which was launched last week, has overtaken rivals including ChatGPT to become the most downloaded free app in the United States.
Shares in chip giant Nvidia fell 10% while Microsoft and Meta were also lower in early trading in the US on Monday.
The chatbot was reportedly developed for a fraction of the cost of its rivals, raising questions about the future of America’s AI dominance and the scale of investments US firms are planning.
Who founded DeepSeek?
The company was founded in 2023 by Liang Wenfeng in Hangzhou, a city in southeastern China.
The 40-year-old, an information and electronic engineering graduate, also founded the hedge fund that backed DeepSeek.
He reportedly built up a store of Nvidia A100 chips, now banned from export to China. Experts believe this collection – which some estimates put at 50,000 – led him to launch DeepSeek, by pairing these chips with cheaper, lower-end ones that are still available to import.
Liang was recently seen at a meeting between industry experts and the Chinese premier Li Qiang.
In a July 2024 interview with The China Academy, external, Liang said he was surprised by the reaction to the previous version of his AI model.
“We didn’t expect pricing to be such a sensitive issue,” he said.
“We were simply following our own pace, calculating costs, and setting prices accordingly.”
DeepSeek’s popularity has startled markets
Peter Hoskins & Imran Rahman-Jones
Business and technology reporters
ASML, the Dutch chip equipment maker, saw its share price tumble by more than 10% while shares in Siemens Energy, which makes hardware related to AI, plunged by 21%.
“This idea of a low-cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,” said Fiona Cincotta, senior market analyst at City Index.
“So, if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure.”
And Singapore-based technology equity advisor Vey-Sern Ling told the BBC it could “potentially derail the investment case for the entire AI supply chain”.
But Wall Street banking giant Citi cautioned that while DeepSeek could challenge the dominant positions of American companies such as OpenAI, issues faced by Chinese firms could hamper their development.
“We estimate that in an inevitably more restrictive environment, US access to more advanced chips is an advantage,” its analysts said in a report.
White House won’t like the waves DeepSeek is making in AI world
Michelle Fleury
Business correspondent, reporting from New York
Investors are beginning to question America’s dominance in the artificial intelligence (AI) race after a “made in China” model climbed to the top spot of Apple’s App Store.
The free assistant, developed by the company DeepSeek, nearly matches the performance of American rivals, like Open AI’s ChatGPT, despite using less powerful chips and less data.
The White House won’t like it.
Although AI did not feature much on the campaign trail, since taking office Donald Trump has made sure AI was front and centre – signing a number of executive orders aimed at advancing the technology.
And Wall Street is concerned that this shift will reduce demand for AI hardware. As trading began today, shares in leading American chipmaker Nvidia dropped by more than 10 percent, while shares of ASML shares saw significant losses in European markets.
The reassessment comes just ahead of a busy week, with major AI spenders like Microsoft and Meta preparing to report their earnings and update investors.
Is DeepSeek cheaper than its rivals?
Peter Hoskins & Imran Rahman-Jones
Business and technology reporters
DeepSeek is powered by the open source DeepSeek-V3 model, which its researchers claim was developed for around $6m – significantly less than the billions spent by rivals.
But this claim has been disputed by others in AI.
The researchers say they use already existing technology, as well as open source code – software that can be used, modified or distributed by anybody free of charge.
DeepSeek’s emergence comes as the US is restricting the sale of the advanced chip technology that powers AI to China.
To continue their work without steady supplies of imported advanced chips, Chinese AI developers have shared their work with each other and experimented with new approaches to the technology.
This has resulted in AI models that require far less computing power than before.
It also means that they cost a lot less than previously thought possible, which has the potential to upend the industry.
DeepSeek hit with ‘large-scale cyberattack’
Chinese AI start-up DeepSeek says that it will temporarily limit user registrations “due to large-scale malicious attacks” on its services.
This is breaking news, we will bring you more updates shortly.
‘AI’s Sputnik moment
After DeepSeek-R1 was launched earlier this month, the company boasted of “performance on par with” one of OpenAI’s latest models when used for tasks such as maths, coding and natural language reasoning.
Silicon Valley venture capitalist and Trump advisor Marc Andreessen described DeepSeek-R1 as “AI’s Sputnik moment”, a reference to the satellite launched by the Soviet Union in 1957.
At the time, the US was considered to have been caught off-guard by their rival’s technological achievement.
China throws wrench into AI race on a seemingly shoestring budget
Lily Jamali
North America Technology Correspondent
White House press conferences are nice, but downloads are the true coin of the realm in tech.
Right now, the newest AI model by China’s DeepSeek tops the charts on Apple’s App Store in the US.
The release has sent AI-related stocks like Nvidia and Oracle into a tailspin.
Just last week, Oracle’s Larry Ellison was standing next to Trump alongside SoftBank’s Masa Son and OpenAI CEO Sam Altman announcing Stargate.
The joint venture involves $100bn (£801m) in private investment to build critical infrastructure including data centres that have powered the AI revolution.
That starting investment is set to grow to a whopping $500 billion over the next few years.
For years, we’ve been hearing that ever more capital and energy are required to ensure the US doesn’t fall behind China.
The US has seen to it that China can’t access some of the most advanced chips made by Nvidia.
But DeepSeek’s sudden ascendance has thrown a wrench into the AI race.
China appears to have pulled off this triumph on a shoestring compared to the resources its American counterparts have to work with.
How much have big tech stock prices dropped?
At the time of writing, these are Monday’s losses from some of the biggest tech companies in the US.
- Microsoft : 3.7% drop
- Nvidia, the third-most valuable company in the US, behind Microsoft and Apple: 15% drop
- Alphabet (Google): 2.6% drop
- Tesla: 1.5% drop
- Cisco Systems: 4.9% drop
- Chipmaker Broadcom: 16.43% drop
Apple and Meta have slightly increased in value today, with Apple up 2.65% and Meta up 1.69%.
Emergence of DeepSeek raises data privacy questions
Kayla Blomquist, a researcher at the Oxford Internet Institute and director of the Oxford China Policy Lab, says one of the big questions that will emerge as DeepSeek grows more popular is whether users’ data will be safe with the Chinese-made app.
“It’s, very difficult, if not impossible, to know for sure that there are not backdoors built into a system, that there are not other methods of data exfiltration back to mainland China for strategic purposes on the government’s behalf,” Blomquist tells the BBC.
She notes that there is no specific evidence suggesting that users’ data is being accessed by China’s government in some capacity.
But she adds that “these will be types of questions that will never go away in the current geopolitical environment”.
