[A man playing chess against a robot. Photo Credits: Pexels]

DeepSeek, a Chinese artificial intelligence startup, released its groundbreaking AI model series, DeepSeek R1, on January 20th, 2025, taking the stock market by storm and reinforcing the competition between China and the United States.

Accompanying the release of R1 was a research paper promoting open-source sharing of the model’s development, which quickly captured public interest. 

While R1 demonstrates cognitive thinking skills comparable to existing AI models like ChatGPT and Llama, it distinguishes itself through a revolutionary approach: operating at a fraction of its U.S. competitors' costs.

DeepSeek revealed a development cost of $5.6 million for R1.

Although critics contend that this figure excludes additional operational factors, the India Times noted, "It is still a far cry from the $250 billion analysts estimate big U.S. cloud companies will spend this year on AI infrastructure.”

In comparison, OpenAI’s ChatGPT incurs operating costs of $700,000 daily.

The cost efficiency immediately impacted major players in the industry.

The stock prices of leading AI chipmakers have plummeted, with Nvidia and Broadcom experiencing 16.9% and 17.4% declines, respectively.

Tech giants Alphabet (Google), Amazon, and Microsoft also witnessed value decreases of 3%, 1%, and 3%, respectively.

DeepSeek’s achievement of creating an AI model using less expensive chips has stunned critics and investors.

Marc Andreessen, the Silicon Valley businessman and Trump supporter, declared on social media that DeepSeek is “one of the most amazing and impressive breakthroughs I’ve ever seen” and “AI’s Sputnik moment,” comparing this technological battle with the Soviet Union’s satellite launch in 1957.

This development comes amid heightened competition between the United States and China, particularly following the U.S. ban on TikTok over Chinese government surveillance concerns.

In addition, before leaving office, former President Joe Biden restricted the exportation of Nvidia’s chips to China to maintain U.S. technological supremacy.

Regardless, DeepSeek successfully navigated these challenges.

Its founder, Liang Wenfeng, had stockpiled an estimated 50,000 Nvidia A100 chips before the ban for the development before releasing the R1 with an alternative chip.

Industry observers remain divided on the long-term implications.

CNN reporter David Goldman argues, "One achievement, albeit gobsmacking, may not be enough to counter years of progress in American AI leadership. And a massive customer shift to a Chinese startup is unlikely.”

Conversely, Sean Burch from The Wrap contends this achievement “shows that China is further along in AI innovation than many had thought.”

DeepSeek’s impact was immediately evident as it became the most downloaded app in the last week of January 2025, overtaking ChatGPT in Apple’s App Store.

However, on January 25th, 26th, and 27th, DeepSeek’s model was investigated, and within two hours of monitoring, it was the subject of a malicious cyberattack.

By taking measures to restrict users, DeepSeek limited the number of new registrations while keeping the interface intact for its existing users.

According to FastNetMon, these attacks seemed to coincide with the launch of the new R1 model, which was accused of attempting to disrupt DeepSeek’s breakthrough launch.

Deepseek’s breakthrough has disrupted the AI industry and symbolizes a new chapter in the ongoing tech rivalry between China and the United States.