Last week's release of the free-to-use DeepSeek app proved incredibly popular, toppling OpenAI's ChatGPT from the top of Apple's App Store this weekend to become the platform's most downloaded app. Something sure to cause a stir no matter what given the widespread popularity and dominance of OpenAI's frontier AI chatbot over the last few years.
However, the real impact of DeepSeek was seen by AI developers and investors paying attention to the company's claims surrounding training and monetization. Not only are DeepSeek's latest V3 and R1 models up to 97% cheaper to use than the competition (Only 55 cents per million tokens, compared to OpenAI's $15 cost per million tokens), but one of its models was reportedly trained on less powerful hardware than that available for US companies for less than $6 million, a fraction of what Google, OpenAI, and Meta are currently spending to develop frontier models.
These claims (however dubious) have sent ripples through the AI space, particularly impacting the stock of major AI players like Nvidia, which took a $593 billion hit to its market value yesterday. As Annex Wealth Management chief economist, Brian Jacobsen, suggested, "It could mean less demand for chips, less need for a massive build-out of power production to fuel the models, and less need for large-scale data centers."
Success to this degree has to be commended, but drawing this level of attention and influence over markets also paints a giant target on the company's back. Given the U.S. reaction to similarly disruptive Chinese-owned companies in the tech space like Huawei or TikTok, there's no guarantee that these successes won't be short-lived.
DeepSeek: Will it get the TikTok treatment?
When we think of the major players in the smartphone world, it's often seen as a two-horse race between Samsung and Apple. However, there was a time when a third name was involved in that mix: Huawei.
Surprisingly, this brand wasn't even competing from a distant third place. In 2018, Huawei overtook Apple and became the world's second-largest smartphone seller behind Samsung, ending a seven-year stint of inseparability.
However, Huawei's initial successes were hamstrung after the FCC voted to ban the sale of its devices in 2022. This decision was based on national security concerns that the Chinese manufacturer's devices could potentially be used by the Communist Party of China (CCP) for surveillance or espionage purposes.
Similar actions by the U.S. can be seen with the recent TikTok ban, which also became a pressing matter in 2022 when FBI Director Chris Wray claimed that "the Chinese government could use [TikTok] to control data collection on millions of users or control the recommendation algorithm, which could be used for influence operations."
With the success of Chinese-owned DeepSeek, we once again see the dominance of an American company like OpenAI threatened similar to how Apple was by Huawei, and a powerful AI assistant with built-in biases that censor any anti-CCP sentiment and over-abundant data collection that reaches as far as tracking the rhythm and pattern of your keystrokes — which can be accurately used as a type of biometric authentication to identify a person.
Add to this claims that DeepSeek is using Nvidia H100 and A100 GPUs to train its models, hardware banned from export to China by U.S. sanctions in 2022 — a claim backed by Elon Musk — and DeepSeek could find itself in deep water if placed under scrutiny.
What's next
All the markers are there to place DeepSeek firmly in the crosshairs of the U.S. government. Given the current push to make the United States the "World's capital of AI," it stands to reason that the success of China's frontier AI may be short-lived.
For now, DeepSeek's claims of cost-effective competition to big spenders are causing more to be impressed than call for investigation with President Trump stating that DeepSeek "should be a wakeup call for our industries that we need to be laser-focused on competing to win." However, this sentiment will surely only extend to the limits of DeepSeek's low-cost training claims being proven true.
Representative John Moolenaar (R-Mich), chair of the House Select Committee on China, has taken a more firm stance on DeepSeek. On Monday, Moolenaar stated, "The U.S. cannot allow CCP models such as DeepSeek to risk our national security and leverage our technology to advance their AI ambitions. We must work to swiftly place stronger export controls on technologies critical to DeepSeek’s AI infrastructure."
