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What is DeepSeek and why has it shaken the AI sector? What is DeepSeek and why did it cause tech stocks to drop?
(about 2 hours later)
An AI-powered chatbot by the Chinese company DeepSeek has quickly become the most downloaded free app on Apple's store, following its January release in the US.An AI-powered chatbot by the Chinese company DeepSeek has quickly become the most downloaded free app on Apple's store, following its January release in the US.
The app's sudden popularity, as well as DeepSeek's reportedly low costs compared to those of US-based AI companies, have thrown financial markets into a spin.The app's sudden popularity, as well as DeepSeek's reportedly low costs compared to those of US-based AI companies, have thrown financial markets into a spin.
Silicon Valley venture capitalist Marc Andreessen has hailed DeepSeek as "one of the most amazing and impressive breakthroughs" in AI.Silicon Valley venture capitalist Marc Andreessen has hailed DeepSeek as "one of the most amazing and impressive breakthroughs" in AI.
The company says its latest AI models are on par with industry-leading models in the US - like ChatGPT - at a fraction of the cost.The company says its latest AI models are on par with industry-leading models in the US - like ChatGPT - at a fraction of the cost.
Researchers behind the app have said it only took $6m (£4.8m) to build it, much less than the billions spent by AI companies in the US.Researchers behind the app have said it only took $6m (£4.8m) to build it, much less than the billions spent by AI companies in the US.
What is DeepSeek?What is DeepSeek?
DeepSeek is a Chinese artificial intelligence company founded in Hangzhou, a city in southeastern China.DeepSeek is a Chinese artificial intelligence company founded in Hangzhou, a city in southeastern China.
The company was launched in July 2023 by Liang Wenfeng and funded by the Chinese entrepreneur's hedge fund.The company was launched in July 2023 by Liang Wenfeng and funded by the Chinese entrepreneur's hedge fund.
It was released in the US on 10 January, according to Sensor Tower, external. DeepSeek's AI assistant app was released in the US on 10 January, according to Sensor Tower, external.
Wenfeng reportedly built up a store of Nvidia A100 chips - which some estimates put at 50,000 - which are now banned from export to China.Wenfeng reportedly built up a store of Nvidia A100 chips - which some estimates put at 50,000 - which are now banned from export to China.
Experts believe this collection enabled him to launch DeepSeek, by pairing the powerful chips with cheaper, lower-end ones that are still available to import.Experts believe this collection enabled him to launch DeepSeek, by pairing the powerful chips with cheaper, lower-end ones that are still available to import.
Watch: What is DeepSeek? The BBC's AI correspondent explainsWatch: What is DeepSeek? The BBC's AI correspondent explains
Who is using it?Who is using it?
The company's AI app is available for download in Apple's App Store and online at its website.The company's AI app is available for download in Apple's App Store and online at its website.
The service, which is free, has quickly become the top downloaded app on Apple's store, although there have been some reports of people having trouble signing up.The service, which is free, has quickly become the top downloaded app on Apple's store, although there have been some reports of people having trouble signing up.
It has also become the top-rated free application in the US on Apple's app store.It has also become the top-rated free application in the US on Apple's app store.
What does the app do?What does the app do?
DeepSeek has become popular for its powerful AI assistant which operates similarly to ChatGPT.DeepSeek has become popular for its powerful AI assistant which operates similarly to ChatGPT.
According to its description on the App Store, it is designed "to answer your questions and enhance your life efficiently".According to its description on the App Store, it is designed "to answer your questions and enhance your life efficiently".
Comments left by users rating the app say "it gives the writing more personality".Comments left by users rating the app say "it gives the writing more personality".
DeepSeek's low cost creates concern for America's AI future But the chatbot skirts at least one politically sensitive question.
DeepSeek was reportedly developed for a fraction of the cost of its rivals, raising questions about the future of America's AI dominance and the scale of investments US firms are planning. When the BBC asked the app what happened at Tiananmen Square on 4 June 1989, DeepSeek replied: "I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses."
The company behind ChatGPT - OpenAI - has been a global leader in the burgeoning field and Nvidia has become one of the highest valued companies in the world, when measured by market capitalization. OpenAI CEO Sam Altman joined financial and other firms at a White House event last week, where they pledged to invest $500bn (£400bn) in building AI infrastructure in the US. Why is it hitting American companies like Nvidia?
There are no firm reports on how much it cost to build ChatGPT, but based on reporting from The Information, many people believe it took $540mn, nearly 100 times the cost of DeepSeek. DeepSeek was reportedly developed for a fraction of the cost of its US rivals - hundreds of millions of dollars less - raising questions about the future of America's AI dominance.
DeepSeek's possibly lower costs roiled financial markets on 27 January, leading the tech-heavy Nasdaq to fall more than 3%. Nvidia was down more than 12% on the morning of 27 January. Microsoft lost roughly 4% percent, and Oracle dipped more than 7%. The company's possibly lower costs roiled financial markets on 27 January, leading the tech-heavy Nasdaq to fall more than 3% in a broad sell-off that included chip makers and data centres around the world.
Nvidia, a US-based company that makes the powerful chips that run AI, appears to have been hit the worst.
It lost nearly $600bn in market value on Monday - the largest one-day drop for any company in US history - as its stock price plunged 17% over the course of the day.
Nvidia had been the most valuable company in the world, when measured by market capitalization, but fell to third place after Apple and Microsoft on Monday when its market value shrank to $2.9tn from $3.5tn, Forbes reported.
DeepSeek uses less advanced semiconductor chips than the ones created by Nvidia.
Their success undercuts the belief that bigger budgets and top-tier chips are the only ways of advancing AI, a prospect which has created massive uncertainty about the need and future of high-performance chip.