I didn’t write this blog, except the wrapper. I was curious about how AI would respond to the emergence of yet another rival, so this morning I asked ChatGPT “Tell me about DeepSeek, and how it’s shaking up the AI market?”, and this is the result.  Please forgive the AI’s standard formatting and poor punctuation. 

“DeepSeek, a Chinese artificial intelligence (AI) startup founded in 2023 and backed by the hedge fund High-Flyer, has recently made significant waves in the AI industry with its latest model, DeepSeek-R1. This model has demonstrated capabilities comparable to leading AI systems, such as OpenAI’s o1, but was developed at a fraction of the cost – approximately $6 million – without relying on advanced semiconductor chips.  

The efficiency of DeepSeek-R1 is attributed to a technique known as the “mixture of experts,” which activates only the necessary computing resources for a given task. This approach not only enhances performance but also significantly reduces energy consumption.  

The emergence of DeepSeek has had immediate and profound effects on the global tech market. Major U.S. tech companies, including Nvidia, Microsoft, and Tesla, experienced substantial declines in their stock values, collectively losing nearly $1 trillion. Nvidia, in particular, saw a record 17% drop in its market capitalization.  

DeepSeek’s advancements challenge the prevailing notion that leading-edge AI development is confined to U.S. tech giants. By open-sourcing its models under an MIT license, DeepSeek is promoting a more accessible and collaborative approach to AI development. This move could disrupt existing pricing models and democratize access to advanced AI technologies.  

However, the rise of DeepSeek also raises concerns about the geopolitical implications of powerful AI technologies being developed outside the U.S., particularly in China. Issues such as potential censorship and the strategic use of AI are now at the forefront of discussions among policymakers and industry leaders.  

In summary, DeepSeek’s innovative approach and rapid progress are reshaping the AI landscape, prompting both excitement and caution as the global community navigates this new era of technological advancement.”

This potential disruption in the US domination of AI should be a wake up call to governments and investors alike, when buying into any “best of breed” scenarios, put before them. Governments rarely seem to understand that the industry-requested programs they fund, are really operational and capital subsidies, rather than accelerators or innovation catalysts. Watch this space as the story develops over the next few months.