Former US President Donald Trump has called the rise of Chinese AI company DeepSeek a “wake-up call” for the US tech industry. The company’s new R1 model has sent shockwaves through Wall Street.
Shares of major US tech firms, including Nvidia, dropped sharply. Nvidia alone lost nearly $600 billion in market value. DeepSeek claims its R1 model was developed at a fraction of the cost compared to competitors. This raises questions about the future of America’s AI leadership and the scale of investments required to compete.
DeepSeek’s app became the most downloaded free app in the US within a week of its launch. Trump, however, said the development might be “positive” for the US. He suggested that cheaper, more efficient AI models could benefit the industry. He also expressed confidence that the US will remain a dominant player in AI.
Despite its success, DeepSeek has sparked cybersecurity concerns in some countries. Australia’s Science Minister Ed Husic urged caution, citing potential issues with data privacy, quality, and consumer trust.
DeepSeek’s R1 model uses the open-source DeepSeek-V3 platform. Its researchers claim it was trained for just $6 million—far less than the billions spent by US rivals. Some experts have disputed this figure. However, it highlights China’s collaborative approach, which focuses on resource-sharing and efficiency. These methods allow Chinese AI developers to produce models that require less computing power and cost far less.
This breakthrough comes as the US tightens restrictions on the sale of advanced chips to China. Despite these limits, Chinese developers continue to innovate, potentially reshaping the global AI market.
Global markets reacted to DeepSeek’s announcement. While the US Nasdaq index saw slight recovery, Japan’s Nikkei 225 dropped by 1.4%. Shares in Japanese AI-related firms, such as Softbank and Advantest, fell sharply. Meanwhile, the UK’s FTSE 100 index remained resilient, posting a modest 0.46% gain.
DeepSeek’s rise could have far-reaching implications, challenging the dominance of US tech giants and reshaping the future of AI.
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