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What is DeepSeek and why did it cause tech stocks to drop? DeepSeek: the Chinese AI app that has the world talking
(about 11 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. DeepSeek has stunned the world - what do we know about it?
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. A Chinese-made artificial intelligence (AI) model called DeepSeek has shot to the top of Apple Store's downloads, stunning investors and sinking some tech stocks.
Silicon Valley venture capitalist Marc Andreessen has hailed DeepSeek as "one of the most amazing and impressive breakthroughs" in AI. It was released on 20 January, quickly impressing AI geeks before it got the attention of the entire tech industry - and the world.
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. US President Donald Trump said it was a "wake-up call" for US companies who must focus on "competing to win".
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 makes DeepSeek so special is the company's claim that it was built at a fraction of the cost of industry-leading models like OpenAI - because it uses fewer advanced chips.
That possibility caused chip-making giant Nvidia to shed almost $600bn (£482bn) of its market value on Monday - the biggest one-day loss in US history.
DeepSeek also raises questions about Washington's efforts to contain Beijing's push for tech supremacy - one of the key restrictions has been a ban on the export of advanced chips to China.
Beijing, however, has doubled down, with President Xi Jinping declaring AI a top priority. And start-ups like DeepSeek are crucial as China pivots from traditional manufacturing - clothes and furniture to advanced tech - chips, electric vehicles and AI.
So what do we know about DeepSeek?
What is DeepSeek?What is DeepSeek?
DeepSeek is a Chinese artificial intelligence company founded in Hangzhou, a city in southeastern China. At its simplest, DeepSeek is an AI-powered chatbot, like ChatGPT.
The company was launched in July 2023, but its popular AI assistant app was not released in the US until 10 January, according to Sensor Tower, external. This is the free app being downloaded on the Apple's app store, where DeepSeek says it is designed "to answer your questions and enhance your life efficiently".
Who is Liang Wenfeng, DeepSeek's founder? But the AI model that powers it - called R1 - has some 670 billion parameters, making it the largest open-source large language model yet, according to Anil Ananthaswamy, author of Why Machines Learn: The Elegant Math Behind Modern AI.
Liang Wenfeng partly funded DeepSeek using money from a hedge fund that he also launched. Its reportedly as powerful as OpenAI's O1 model - which powers ChatGPT - in mathematics, coding and reasoning.
The 40-year-old, an information and electronic engineering graduate, reportedly built up a store of Nvidia A100 chips, now banned from export to China. Like many other Chinese AI models - Baidu's Ernie or Doubao by ByteDance - DeepSeek is trained evades politically sensitive questions.
Experts believe this collection - which some estimates put at 50,000 - led him to launch DeepSeek, by pairing these chips with cheaper, lower-end ones that are still available to import. When the BBC asked the app what happened at Tiananmen Square on 4 June 1989, DeepSeek did not give any details about the massacre, a taboo topic in China.
Mr Liang was recently seen at a meeting between industry experts and the Chinese premier Li Qiang. It replied: "I am sorry, I cannot answer that question. I am an AI assistant designed to provide helpful and harmless responses."
Chinese government censorship was thought to be a huge challenge for developing AI. But DeepSeek appears to have been trained on an open-source model, which enables it to perform complex tasks, while also withholding certain information.
And it says it has been able to do this cheaply - researchers behind it claim it cost $6 million (£4.8m) to build, a shoestring budget compared to the billions spent by AI firms in the US.
How exactly they did this is still unclear. DeepSeek's founder reportedly built up a store of Nvidia A100 chips, which have been banned from export to China since September 2022.
Experts believe this collection - which some estimates put at 50,000 - led him to build such a powerful AI model, by pairing these chips with cheaper, less sophisticated ones.
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 behind DeepSeek?
The company's AI app is available for download in Apple's App Store and online at its website. DeepSeek was founded in December 2023 by Liang Wenfeng, and released its first AI large language model the following year.
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. Not much is known about Liang, who graduated from Zhejiang University with degrees in electronic information engineering and computer science. But he now finds himself in the international spotlight.
It has also become the top-rated free application in the US on Apple's app store. He was recently seen at a meeting hosted by China's premier Li Qiang, reflecting DeepSeek's growing prominence in the AI industry.
What does the app do? Unlike many American AI entrepreneurs who are from Silicon Valley, Mr Liang also has a background in finance.
DeepSeek has become popular for its powerful AI assistant which operates similarly to ChatGPT. He is the CEO of a hedge fund called High-Flyer, which uses AI to analyse financial data to make investment decisons - what is called quantitative trading. In 2019 High-Flyer became the first quant hedge fund in China to raise over 100 billion yuan ($13m).
According to its description on the App Store, it is designed "to answer your questions and enhance your life efficiently". In a speech he gave that year, Liang said, "If the US can develop its quantitative trading sector, why not China?"
Comments left by users rating the app say "it gives the writing more personality". In a rare interview last year, he said China's AI sector "cannot remain a follower forever".
But the chatbot skirts at least one politically sensitive question. He went on: "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."
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." Asked why DeepSeek's model surprised so many in Silicon Valley, he said: "Their surprise stems from seeing a Chinese company join their game as an innovator, not just a follower - which is what most Chinese firms are accustomed to."
Watch: DeepSeek AI bot responds to BBC question about Tiananmen Square How are US companies hit?
Why is it hitting American companies like Nvidia? DeepSeek's achievements undercut the belief that bigger budgets and top-tier chips are the only ways of advancing AI, a prospect which has created uncertainty about the future of high-performance chips.
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 has proven that cutting-edge AI models can be developed with limited compute resources," says Wei Sun, principal AI analyst at Counterpoint Research.
"In contrast, OpenAI, valued at $157 billion, faces scrutiny over its ability to maintain a dominant edge in innovation or justify its massive valuation and expenditures without delivering significant returns."
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.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. Nvidia appears to have been hit the worst as its stock price plunged 17% over the course of the day.
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. The chip maker had been the most valuable company in the world, when measured by market capitalisation, but fell to third place after Apple and Microsoft on Monday, when its market value shrank to $2.9tn from $3.5tn, Forbes reported.
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. Watch: DeepSeek AI bot responds to BBC question about Tiananmen Square
DeepSeek uses less advanced semiconductor chips than the ones created by Nvidia. How is China reacting?
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. DeepSeek's rise is a huge boost for the Chinese government, which has been seeking to build tech independent of the West.
While the Communistyt Party is yet to comment, Chinese state media was eager to note that Silicon Valley and Wall Sreet giants were "losing sleep" over DeepSeek, which was "overturning" the US stock market.
"In China, DeepSeek's advances are being celebrated as a testament to the country's growing technological prowess and self-reliance," says Marina Zhang, an associate professor at the University of Technology Sydney.
"The company's success is seen as a validation of China's Innovation 2.0, a new era of homegrown technological leadership driven by a younger generation of entrepreneurs."
But she also warned that this sentiment may also lead to "tech isolationism".
Additional reporting by João da Silva