Deepseek and Disrupt: the New Chinese AI

February 3rd, 2025

Aaniya Khan

Born just last May in Hangzhou, China, artificial intelligence startup DeepSeek has pulled off something no tech tycoon saw coming. They've created an AI model that's giving ChatGPT a serious run for its money – and they did it on a budget that would make most tech CEOs laugh. In a groundbreaking development, DeepSeek has unveiled its latest model, DeepSeek-R1, positioning itself as a formidable competitor to established AI giants and a company to watch as the AI and tech sector continues to grow.

Here's the crazy part: while companies like OpenAI reportedly spent over $100 million developing their top models, DeepSeek built DeepSeek-R1 for just $6 million. It's similar to making a gourmet meal with a convenience store budget. How? This cost-effectiveness is attributed to DeepSeek’s innovative approach, which emphasizes efficient resource utilization without relying on the most advanced hardware. The company employs a “mixture of experts” technique, activating only the necessary computing resources for a given task, thereby enhancing efficiency and reducing energy consumption.

But the tech world hasn’t just noticed this – it's panicking. When DeepSeek announced its model, the stock market went into shock. Following the announcement, major tech stocks experienced substantial declines. Nvidia, the tech giant that's been ruling the AI hardware world, saw its market value drop by a mind-blowing $593 billion — the largest in U.S. stock market history. Other tech giants, including Alphabet and Microsoft, also faced notable losses. This market reaction underscores the disruptive potential of DeepSeek’s technology and raises questions about the future dynamics of the AI industry.

But why have consumers made the drastic change? Unlike some tech companies that guard their technology like secret recipes, DeepSeek is taking a different approach challenging the proprietary models of competitors like OpenAI. They've released their R1 model under an open-source license, basically telling the world, "here's our tech – go wild and build something amazing." The open-source nature of DeepSeek-R1 not only democratizes access to advanced AI but also fosters innovation by enabling a broader community to build upon its foundation.

However, it’s not all celebration. The model has raised serious concerns, particularly in Europe, where data privacy and ethical considerations have come under scrutiny. Italy has already banned DeepSeek over fears about how the company handles user data and potential cybersecurity risks. Additionally, there are growing concerns about the Chinese government’s influence on DeepSeek’s operations, especially given reports that the model aligns with Chinese Communist Party narratives. For instance, when asked about sensitive topics such as the Tiananmen Square protests or the treatment of Uyghur Muslims, the model avoids answering directly, instead responding with, “Sorry, that’s beyond my current scope. Let’s talk about something else.”

These concerns become even more pressing in light of recent events. Following the U.S. decision to ban TikTok over national security risks, many American users have swiftly migrated to alternative Chinese platforms like Red Note (Xiaohongshu.) At the same time, the rapid adoption of DeepSeek underscores the growing dominance of China’s tech sector, which is increasingly outpacing U.S. companies with more sophisticated models. This shift is not only significant—it suggests that China’s influence over global technology is just getting started.

Artificial Intelligence is only growing, and DeepSeek just showed everyone they're not here to play – they're here to compete and beat the titans of tech.