It is amazing how quickly the Chinese AI app DeepSeek has shaken up the tech industry, markets and American sense of superiority when it comes to artificial intelligence (AI).
Marc Andreessen, a venture capitalist, may have put it best. He wrote on Sunday that "DeepSeek R1 is AI's Sputnik Moment". This was a reference to the satellite that started the space race.
DeepSeek, Apple's US App Store's most popular free app over the weekend. On Monday, DeepSeek had caused a sell-off in major tech stocks that were already in freefall due to fears about America's dominance in the sector.
By the close of US markets on Monday , shares of AI chip designer Nvidia, a recent Wall Street darling, had fallen by 17%. Or, to put it even more bluntly, the market value of Nvidia fell by nearly $600bn, which according to Bloomberg is the largest drop in US stock market history.
The cost is a major factor in this extraordinary and historic spooking. DeepSeek developers made a claim that raised serious questions in Silicon Valley.
DeepSeek developers claim that while ChatGPT maker OpenAI is losing money, spending $5bn in the last year alone, they built their latest model for just $5.6m.
This is a fraction of what AI giants such as OpenAI, Google and Anthropic spent to create their models.
When I called those in Silicon Valley who usually love to chat, the silence was palpable. Many analysts, investors and observers appeared shocked.
Others wondered if it was a good time to buy. Some questioned DeepSeek's information.
Gene Munster, a veteran analyst, told me Monday that "I believe the truth lies below the surface" when it comes to what is actually going on. He questioned DeepSeek's financials, wondering if it was subsidised and if its numbers were accurate.
He said that the chatbot was "surprisingly good", which made it difficult to believe.
To use his words, DeepSeek’s sudden arrival was a “flex” by China and "a black eye for US technology."
Last week, OpenAI's Sam Altman, and Oracle's Larry Ellison, joined President Donald Trump at a news event that could have easily been a release.
The event was a culmination of American swaggering on AI.
Stargate is a joint venture which promises private investments of up to $500bn for AI infrastructure. Data centres are located in Texas and elsewhere, with the promise of 100,000 new jobs.
The US appeared to believe that its abundance of data centres and control of the highest-end chip gave it an overwhelming lead in AI despite China's dominance over rare-earth materials and engineering talent.
Many people have assumed that America will dominate the AI race despite warnings by top executives, who warned against taking the advantages of the country for granted.
DeepSeek may have shaken off some of the US's swagger, but it is still possible that they will continue to dominate this sector.
Altman and Ellison were likely not comforted by Trump's comments after the sudden appearance of the Chinese app in recent days. He said that this was a "wake up call" for American tech companies and that finding a cheaper way to implement AI would be a good thing.
Also, it is worth mentioning that not only tech stocks took a hit on Monday. The same thing happened to energy stocks. DeepSeek has changed the way we think about AI development.
Perhaps the nuclear renaissance, which includes restarting America's Three Mile Island power plant, will not be required. It may not require so much computing power, capital or capital.
The future of semiconductor giants such as Nvidia is still uncertain.
DeepSeek claims that its model was created using existing technology and open-source software, which can be shared freely by anyone.
WIRED reports, however, that High-Flyer, the hedge fund of DeepSeek founder Liang Wenfung, has been stockpiling GPUs (graphics processing units) for years.
The company said that its models used H800 chips manufactured by Nvidia. The new Trump administration may reconsider the US policy that restricts sales of high-powered chips in China.
OpenAI's Sam Altman remained mostly silent on X Monday. He wrote, very late in his day, that DeepSeek "was impressive... especially around what they are able to deliver for their price".
"We'll deliver better models, and it is a real boost to have a competitor!" He wrote.
Sputnik was the one who truly brought in the age of space. The US was also caught off-guard. It will be interesting to see how the US tech sector reacts to this apparent surprise by a Chinese company. This could have added serious fuel for the AI race.
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