DeepSeek AI: The Chinese AI Startup Disrupting Silicon Valley and Shaking Global Tech Markets

A new player has emerged in the artificial intelligence (AI) industry, and it’s causing seismic shifts in global tech markets. DeepSeek AI, a Chinese-made AI model, has rapidly gained traction, topping the Apple App Store charts and sending ripples through the AI and semiconductor industries. The rise of DeepSeek is more than just another tech startup success story—it’s a wake-up call to Western AI giants and a significant moment in China’s ongoing push for technological supremacy.

The Meteoric Rise of DeepSeek AI

DeepSeek, founded in December 2023 by Liang Wenfeng, has stunned the world with its latest AI model. Released on January 20, 2025, the model quickly gained recognition among AI experts and tech investors, shaking the dominance of OpenAI and other Western AI pioneers. Unlike its competitors, DeepSeek boasts an innovative cost-efficient approach that has sent shockwaves through the semiconductor industry.

One of DeepSeek’s most remarkable claims is that it was built at a fraction of the cost required for industry-leading models like OpenAI’s GPT-4. By optimizing the use of lower-end chips and leveraging innovative training methods, DeepSeek achieved a level of sophistication rivaling OpenAI’s o1 model, particularly in tasks like mathematics and coding. This groundbreaking efficiency caused Nvidia, the world’s leading AI chip manufacturer, to experience the largest single-day market value loss in U.S. history—shedding almost $600 billion.

How Does DeepSeek Work?

DeepSeek operates similarly to OpenAI’s ChatGPT, functioning as a generative AI chatbot that can answer questions, summarize text, assist with coding, and more. Like many AI models, it learns from vast amounts of data to generate human-like responses. However, unlike its Western counterparts, DeepSeek is bound by China’s strict censorship regulations, which prevent it from addressing politically sensitive topics. When asked about the Tiananmen Square incident, for instance, the AI refused to provide details, aligning with Beijing’s censorship policies.

DeepSeek’s AI model utilizes “reasoning” capabilities that allow it to generate responses incrementally, mimicking human thought processes. More importantly, its efficiency in memory usage and training cost—reportedly just $6 million compared to OpenAI’s over $100 million—has made it a formidable competitor in the AI landscape.

Security Concerns and Accusations of Data Theft

Despite its impressive rise, DeepSeek has not been free from controversy. A recent Bloomberg report revealed that Microsoft and OpenAI are investigating whether DeepSeek accessed OpenAI’s technology through unauthorized means. Microsoft security researchers reportedly observed individuals linked to DeepSeek exfiltrating large amounts of data via OpenAI’s API, sparking concerns about intellectual property theft and cybersecurity.

Microsoft, which has heavily invested in OpenAI, immediately flagged the activity, though both OpenAI and DeepSeek have yet to respond to the allegations. If proven true, these accusations could escalate tensions between China and the United States in the AI arms race, adding another layer of complexity to an already intense geopolitical tech war.

Impact on Global Markets

The emergence of DeepSeek has far-reaching consequences, particularly in financial markets. Nvidia’s 17% stock plunge on January 27 triggered a widespread selloff in the Nasdaq, causing global AI investors to reconsider their strategies. OpenAI, valued at $157 billion, now faces increased scrutiny over whether its high expenditure on cutting-edge AI models can be justified if low-cost alternatives like DeepSeek prove to be just as effective.

Meanwhile, China is celebrating DeepSeek’s achievements as a milestone in its pursuit of technological self-sufficiency. With President Xi Jinping prioritizing AI development, DeepSeek’s rise aligns perfectly with Beijing’s goal of reducing reliance on Western tech. However, some experts warn that this could lead to a more insular and fragmented global AI ecosystem, where companies prioritize national security over innovation-sharing.

Who is Liang Wenfeng?

DeepSeek’s founder, Liang Wenfeng, is a relatively enigmatic figure in the AI world. A graduate of Zhejiang University with degrees in electronic information engineering and computer science, Liang made his mark in the financial sector before venturing into AI. As CEO of High-Flyer, a hedge fund specializing in AI-driven quantitative trading, he proved his ability to leverage AI for financial success. His transition into the AI industry was driven by his belief that China must move beyond imitation and establish itself as an innovator in artificial intelligence.

Liang’s ambitions reflect a broader movement within China’s tech sector. In a rare interview last year, he stated, “Often, we say there’s a one or two-year gap between Chinese and American AI, but the real gap is between originality and imitation. If this doesn’t change, China will always be a follower.” His comments suggest that DeepSeek’s goal is not just to compete with Western AI giants but to redefine China’s position as a technological leader.

What’s Next for DeepSeek?

As DeepSeek continues to gain traction, the company faces a crucial period of both opportunity and challenge. On one hand, its ability to develop powerful AI at a lower cost could revolutionize the AI industry, forcing companies like OpenAI, Google DeepMind, and Anthropic to reassess their approach. On the other hand, scrutiny from U.S. regulators and allegations of unauthorized data access could lead to further restrictions on AI collaboration between China and the West.

Moreover, DeepSeek’s model is still largely untested on a global scale. While it has surged in popularity, questions remain about its long-term reliability, ethical considerations, and ability to innovate beyond existing AI frameworks. Additionally, the AI industry’s rapid evolution means that today’s breakthroughs could quickly become obsolete in the face of new technological advancements.

Also Read: What is the Source of OpenAI’s Data?