Explainer: Chinese DeepSeek a wake-up call for US AI?
What is DeepSeek?
Hangzhou-based DeepSeek, an artificial intelligence research lab, was founded in China in the late 2023 by Liang Wenfeng, a serial entrepreneur who also runs the hedge fund High-Flyer. The model was developed using less advanced, and fewer, computer chips than those employed by tech giants in the United States. According to reports, the model’s development team had spent less than $6 million on computing power to train the model, which is just a fraction of the multibillion-dollar AI budgets enjoyed by US tech giants.
Most downloaded app
DeepSeek, surpassed the major global players like ChatGPT and Google Gemini, and has become the most downloaded app on Apple iOS in India across all categories, according to data from Sensor Tower.
Why has DeepSeek taken the tech world by storm?
US tech firms have been widely assumed to have a cutting edge in AI as they invested huge resources in building data centres and purchasing large quantities of costly high-end chips.
The sudden emergence of a small Chinese startup capable of rivalling Silicon Valley’s top players such as OpenAI and Google has challenged assumptions about US dominance in AI. It has also raised fears that the sky-high market valuations of companies such as Nvidia, which holds a near-monopoly on producing the semiconductors that power generative AI, lost nearly $600 billion in market capitalisation after its shares plummeted 17 per cent.
Impact on India
The success of DeepSeek clearly states that that the fixed cost of building models can actually be brought down. Also, it will dramatically lower the entry barrier for nations keen to build models of their own. This also comes when there is a debate in India over whether to build a foundational model from scratch or rely on some already available open source Large Language Models(LLMs) to build wrappers on top of them.
According to Abhivyakti Sengar, Senior Analyst, Everest Group, “If India does not invest in building its own LLMs, it risks becoming a mere consumer in the global AI economy, losing both digital sovereignty and economic opportunities. Indigenous LLMs are not just about technological advancement—they are critical for addressing India's unique linguistic diversity, empowering industries with localised solutions, and ensuring competitiveness on the global stage.” He added further, “Building these models is an investment in India's future, enabling innovation at scale, safeguarding our place in the AI-driven world economy.”
Global impact
DeepSeek’s AI breakthrough has exposed the limits of Trump’s tariffs, challenging Washington’s ability to restrain China’s technological rise, opines the CEO of global financial advisory and asset management giant, deVere Group. The Chinese artificial intelligence startup has developed a cost-effective AI model that operates on less-advanced chips, proving that innovation can evade trade restrictions. Nigel Green, CEO of deVere Group, says, “This is a wake-up call for markets. The assumption that tariffs could contain China’s technological ambitions is being dismantled in real time. He added that markets are already reacting. US semiconductor stocks are under pressure as investors digest the implications of a future where demand for high-end chips could weaken. European tech stocks are also sliding, reflecting broader uncertainty about whether Silicon Valley can maintain its grip on AI’s future.
