DeepSeek, the new Chinese artificial intelligence, has recently shaken the tech world with a groundbreaking innovation: a new algorithm designed to run AI at minimal costs. This has caused a crisis among major tech giants, as huge investments have been made in this field, and DeepSeek signifies an uncertain future for these investments.
According to Saednews' Science and Technology service, quoted from Fararu, the DeepSeek AI assistant was able to become the number one free download on Apple's App Store on Monday. This has caused concerns in global financial markets, and the rise of this Chinese AI has led many investors to sell shares in Western tech companies.
Global investors sold tech stocks on Monday due to concerns over the emergence of the low-cost Chinese AI model, DeepSeek. This model threatens the dominance of leading AI companies like Nvidia. As a result, Nvidia's market value dropped by $593 billion, marking the largest single-day market value loss for any company on Wall Street. But why has DeepSeek suddenly turned the Western tech world upside down? What makes DeepSeek so dangerous that the Western tech industry is afraid of it? And how far can DeepSeek continue to influence Western AI technology?
DeepSeek is an advanced AI model developed in China, introduced as a native alternative to Western models like ChatGPT (from OpenAI) and Gemini (from Google). This model has attracted attention due to its low development costs, reliance on domestic Chinese hardware, and rapid progress. However, it has also caused concern in the West.
One of the main reasons the West is concerned about DeepSeek is the incredibly low cost of developing and running this model compared to its Western competitors.
Feature | Chinese AI (DeepSeek, Baidu, Tencent AI) | Western AI (OpenAI, Google, Meta) |
Data Processing Costs | Lower, using domestic servers and cheaper chips | Very high, requiring Nvidia servers and advanced cloud infrastructure |
Energy and Power Costs | Lower (low-power models) | High (energy-consuming supercomputers) |
Labor Costs | Cheaper labor in China | Expensive specialists in the U.S. and Europe |
Data Resources | Limited to Chinese and non-Western data (but optimized) | Requires extensive global data |
It is claimed that the development of this AI model only cost $5.6 million, and with the cost of purchasing 2,000 cheap graphic processing units (GPUs) from Nvidia, the total budget did not exceed $55 million. This small budget, when compared to the heavy costs of AI development in Silicon Valley, the heart of U.S. technology, was enough to significantly impact the stock prices of global tech and chip companies, and even cryptocurrencies, which saw a sharp decline.
While American models like ChatGPT use Nvidia processors (NVIDIA A100, H100), China has reduced hardware costs by developing domestic chips such as Huawei Ascend and Loongson. This has decreased China’s dependency on Western technologies, making its AI development more independent. As a result, unlike Western companies that rely on expensive component and infrastructure supply chains, China can develop AI models at a much lower cost. This could, over time, challenge the pricing and monopolies of Western tech companies.
Another concern in the West is China’s increasing independence in AI. Until recently, many Chinese companies were dependent on Western technologies to develop their AI models. However, with the development of DeepSeek and other native models, China is reducing its reliance on American companies like Microsoft, Nvidia, and Google. This could threaten the U.S.'s dominance over global AI.
Moreover, China has implemented strong government policies to support domestic AI development, paving the way for technological independence. The Chinese government has allocated large budgets to domestic companies to become less dependent on Western infrastructure. Additionally, strict laws have been put in place to protect data and avoid reliance on foreign models. As a result, the rapid growth of domestic models has made Western companies worried that China could soon achieve technical and data self-sufficiency.
With the advancement of DeepSeek, many countries that cannot use American AI models (due to sanctions or high costs) may turn to Chinese models. Countries like Russia, Iran, Brazil, and several African nations could benefit from these models, boosting China’s position in the global AI market.
This not only helps spread Chinese technology, but it could also create an alternative AI ecosystem that is no longer dependent on Western policies. For example, many Western companies have limited their services in some countries, but Chinese models can operate without such restrictions. This could reduce the U.S.'s dominance over the global AI market and significantly increase China’s influence.
Western companies have invested billions in AI development. If models like DeepSeek can compete with lower costs and similar quality, companies like OpenAI, Google, and Nvidia might face financial losses.
As of this report, the total market value of tech companies has decreased by more than $1 trillion, with key indexes like the S&P 500 and Nasdaq falling by 1.5% and 3.1%, respectively. Nvidia’s stock, one of the largest AI chipmakers, experienced a 17% drop in value, resulting in a $589 billion loss in market value. Other companies like Broadcom, Taiwan Semi, ARM, and AMD also saw their stock prices fall by 16.5%, 14.3%, 10%, and 5.6%, respectively. Billionaires, however, have been the biggest losers due to DeepSeek’s rise.
According to a Bloomberg report, major investors, including the CEOs of Nvidia, Oracle, Dell, Binance, and others whose assets are tied to AI, have lost about $108 billion of their wealth.
Furthermore, the competition to lower AI service prices could also be a threat to Western companies. Currently, the subscription costs for ChatGPT and other similar models are quite high. But if DeepSeek can offer free or cheaper models, many users and companies may lean toward them. This could put pressure on the business models of Western companies, forcing them to reduce their prices, which would result in lower profits and a decrease in their stock values.
Cheaper AI has many advantages, including:
Broader access for developing countries
Lower organizational and corporate costs
Increased adoption in emerging markets
If Chinese models can deliver similar accuracy and performance to Western models, many companies and users may turn to them. This could threaten the position of Western models.
So far, the U.S. has tried to slow down China’s AI development with hardware sanctions (such as banning Nvidia chip exports to China) and restricting access to scientific data. However, these strategies have led China to focus more on developing domestic hardware and data resources. As a result, rather than slowing progress, China has moved closer to technological independence.
While DeepSeek and other similar Chinese models are growing, Western models are still more advanced and precise. However, if China can develop models with similar performance at a lower cost, the competition will intensify.
It seems that in the future, the global AI market will be divided into two camps: Western models (OpenAI, Google) and Chinese models (DeepSeek, Baidu).
