DeepSeek: The Chinese app that made a global splash

DeepSeek uses less memory than its rivals, ultimately reducing the cost of performing tasks for users. This combination of performance and low cost helped this AI app become free and the most downloaded in Apple's App Store when it launched in the United States.

DeepSeek, a Chinese Artificial Intelligence (AI) startup, made headlines in global media after the app set a download record and caused technology stocks in the United States to plummet.

Weeks ago, the app launched its latest model, DeepSeek R1, which it said rivaled the technology developed by ChatGPT creator OpenAI in its capabilities, while taking much less time to create.

Its popularity and potential shocked investors. Billions of dollars were wiped off the value of chip giant Nvidia's stock and raised questions about whether American firms would dominate the market at a time when artificial intelligence is exploding.

US President Donald Trump called all this chaos a "wake-up call" for American companies.

What is artificial intelligence?

To understand why DeepSeek caused a massive stir, one must understand artificial intelligence and its ability to make a computer take on the role of a human.

The machine that is used to solve problems and provide information uses technology, and it usually has to be "trained" on massive amounts of information and recognize patterns of operation.

The end result is software that can have conversations like a person or predict things. In recent years, it has become known as the technology behind “chatbots” like ChatGPT and DeepSeek, known as generative AI.

These programs "learn" from a large amount of data, including text and images on the Internet, to be in  able to create new content. However, these tools can “create” lies and bias searches. Millions of people around the world are using ChatGPT to help them with everyday tasks like writing emails, summarizing texts, and answering questions – and many more use it for programming and coding issues.

What is DeepSeek?

DeepSeek is the name of a free AI chatbot that works in the spirit of ChatGPT. This means that it is used to solve the same tasks, although the accuracy of its operation is still debated.

There are claims that it is as powerful as OpenAI's o1 model, launched in late 2024. Its role is more in solving mathematical and coding tasks. These models provide answers in a step-by-step manner, simulating the way humans reason through problems or ideas.

The Chinese chatbot, Deepseek, has said it was able to make the platform cheaper — researchers say it cost about $6 million to train. It also appears to have managed to minimize the impact of U.S. restrictions on China’s most powerful chips. There is an allegation that the founder of DeepSeek created a store of Nvidia A100 chips, which are banned from being exported to China from September 2022. A group of experts believe that he had merged these chips with cheaper and less sophisticated ones, ending up with a less efficient process.

DeepSeek also uses less memory than its rivals, ultimately reducing the cost of performing tasks for users. This combination of performance and low cost helped this AI app become free and the most downloaded in Apple's App Store when it launched in the United States.

On the same day, the app was hit with "large-scale malicious attacks," the company said, forcing it to temporarily restrict access.

Its website also suffered an outage.

Like other Chinese AI models, Baidu's Ernie or ByteDance's Doubao, DeepSeek has been trained to avoid "politically sensitive" questions.

When the BBC asked the app what happened in Tiananmen Square on June 4, 1989, DeepSeek did not provide any details about the massacre, a taboo subject in China, which is subject to government censorship.

Who is behind DeepSeek?

It was founded in December 2023 by Liang Wenfeng and released its first AI language model the following year. 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.

Wenfeng has experience in finance.

He is the head of a hedge fund called High-Flyer, which uses artificial intelligence to analyze financial data to make investment decisions on quantitative trading. In 2019, the company became the first hedge fund in China and raised over $13 million.

"If the US can develop its quantitative and commercial sector, why not China?" he said in a speech years ago.

On the issue of investing in AI, Wenfeng stated that China cannot always remain a follower of US developments.

"Their surprise stems from seeing a Chinese company joining their game as an innovator, not just a follower - which is what most Chinese firms are used to," he said, when asked why he thinks DeepSeek caused so much buzz in the US.

It has attracted the attention of global leaders, while Australia has banned DeepSeek from government devices and systems, saying it poses a national risk.

Several data protection authorities around the world have asked DeepSeek to clarify how it handles personal information, which it stores on servers based in China.

Italy blocked the app on January 30 and ordered companies to stop processing its citizens' information due to data protection concerns.

Why were American companies like Nvidia hit?

The development of DeepSeek has undermined the belief that big budgets and high-end chips are the only way to advance in the field of artificial intelligence. It has created a perspective that has created uncertainty about the future of high-performance chips.

"DeepSeek has proven that cutting-edge artificial intelligence models are developed with limited computational resources," said Wei Sun, principal analyst for AI at Counterpoint Research.

"In contrast, OpenAI, valued at $157 million, faces scrutiny over its ability to maintain a dominant edge in innovation or justify its massive valuation and spending without delivering large returns," he added.

DeepSeek's low costs shocked financial markets on January 27. This caused sales to fall by three percent across the board, including at chip companies.

Nvidia's stock price fell 17 percent before starting to "stabilize" a few days later.

Chipmakers are considered among the most valuable companies in the world when it comes to market capitalization. But Nvidia fell to third place in the global company rankings. It was ahead of Apple and Microsoft, as its market value shrank to $2.9 trillion from $3.5 trillion, according to a report by Forbes.

DeepSeek is a private company, which means investors cannot buy shares on any of the major stock exchanges.

How has China reacted to the impact of DeepSeek?

DeepSeek's rise is a massive boost for the Chinese government, which has sought to build technology independent of the West. While the country's ruling Communist Party has yet to comment on the developments, Chinese state media has been eager to spotlight such a company to compete with the American giants of Silicon Valley and Wall Street. Both of these were "upsetting" the stock market.

"In China, the development of DeepSeek is being celebrated as a testament to the country's technological prowess and self-confidence," said Marina Zhang, an associate professor at the University of Technology Sydney.

She said that DeepSeek is a testament to China's innovation, part of a new era of leadership, nurtured by a new generation of entrepreneurs.