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. 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.

One week ago, a new and formidable challenger for OpenAI's throne emerged. A Chinese AI start-up, DeepSeek, launched a model that appeared to match the most powerful version of ChatGPT but, at least according to its creator, was a fraction of the cost to build. The program, called DeepSeek-R1, has incited plenty of concern: Ultrapowerful Chinese AI models are exactly what many leaders of American AI companies feared when they, and more recently President Donald Trump, have sounded alarms about a technological race between the United States and the People's Republic of China. This is a "wake up call for America," Alexandr Wang, the CEO of Scale AI, commented on social media. But at the same time, many Americans--including much of the tech industry--appear to be lauding this Chinese AI.

DeepSeek comes with the same caveats as any other chatbots regarding accuracy, and has the look and feel of more established US AI assistants already used by millions. For many – especially those who do not subscribe to top-tier services - it probably feels pretty much the same. Imagine a mathematical problem, in which the true answer runs to 32 decimal places but the shortened version runs to eight. It may be the case it has managed to cut costs and compute, but we do know that it is built at least in part on the shoulders of the giants: it uses Nvidia chips – albeit older, cheaper versions - and utilises Meta's open-source Llama architecture, as well as AliBaba's equivalent Qwen. "I think this absolutely challenges the idea of monetisation strategies that a lot of leading US AI firms have had," said Ms Blomquist.

A new Chinese AI model, created by the Hangzhou-based startup DeepSeek, has stunned the American AI industry by outperforming some of OpenAI's leading models, displacing ChatGPT at the top of the iOS app store, and usurping Meta as the leading purveyor of so-called open source AI tools. All of which has raised a critical question: despite American sanctions on Beijing's ability to access advanced semiconductors, is China catching up with the U.S. in the global AI race? At a supposed cost of just 6 million to train, DeepSeek's new R1 model, released last week, was able to match the performance on several math and reasoning metrics by OpenAI's o1 model – the outcome of tens of billions of dollars in investment by OpenAI and its patron Microsoft. The Chinese model is also cheaper for users. The upshot: the U.S. tech industry is suddenly faced with a potentially cheaper and more powerful challenger, unnerving investors, who sold off American tech stocks on Monday morning.

Wall Street's superstars are tumbling as a competitor from China threatens to upend the artificial-intelligence frenzy that has created a spending bonanza. The S&P 500 was down 1.7 percent in midday trading on Monday and heading for its worst day in more than a month. Big Tech stocks took some of the heaviest losses with Nvidia down 14.4 percent, and they dragged the Nasdaq composite down 2.8 percent. Stocks outside AI-related industries held up much better, though, and the Dow Jones Industrial Average was down just 54 points, or 0.1 percent, as of 11:05 am in New York (16:05 GMT). The Dow, whose companies have much less of an emphasis on tech than the S&P 500 and Nasdaq, had briefly been on track for a small gain earlier in the morning. The shock to financial markets came from China, where a company called DeepSeek said it had developed a large language model that can compete with United States giants at a fraction of the cost.

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An AI assistant created by Chinese startup DeepSeek became the number one most-downloaded app in Apple's US App Store over the weekend, sending shockwaves through Silicon Valley and causing the price of major tech stocks to plummet. Nvidia saw more than 460 billion erased from its market capitalization on Monday, a drop Bloomberg characterized as the "biggest in US stock market history." The shakeup stems from an open source model developed by DeepSeek called R1, which debuted earlier this month. The company said that it rivals the current industry leader: OpenAI's 01. But what stunned the tech industry the most was that DeepSeek claimed to have built its model using only a small fraction of the specialized computer chips that AI companies typically need to develop cutting-edge systems. On Monday, DeepSeek said it was temporarily limiting new registrations, citing "large-scale malicious attacks" on the company's services, according to a message on its website.

Chinese AI assistant DeepSeek has become the top rated free app on Apple's App Store in the US and elsewhere, beating out ChatGPT and other rivals. It's powered by the open-source DeepSeek V3 model, which reportedly requires far less computing power than competitors and was developed for under 6 million, according to (disputed) claims by the company. At the same time, it offers performance that's on par with Claude-3.5, GPT-4o and other rivals, DeepSeek said last week. The news that DeepSeek topped the App Store charts caused a sharp drop in tech stocks like NVIDIA and ASML this morning. Google parent company Alphabet and Microsoft were also down this morning.

Chinese AI assistant DeepSeek has become the top rated free app on Apple's App Store in the US and elsewhere, beating out ChatGPT and other rivals. It's powered by the open-source DeepSeek V3 model, which reportedly requires far less computing power than competitors and was developed for under 6 million, according to (disputed) claims by the company. At the same time, it offers performance that's on par with Claude-3.5, GPT-4o and other rivals, DeepSeek said last week. Available on web, app and API, DeepSeek is similar to AI Assistant like ChatGPT with features like coding content creation and research. Its first DeepSeek-R1 release is available under an MIT license, so it can be used commercially and without restrictions.