Has China’s DeepSeek Changed the AI Landscape?
Tehran - BORNA - In January 2025, the unexpected launch of the Chinese AI application DeepSeek-R1 in the US market marked one of the most disruptive events in the technology world. Developed by a Chinese firm, the app quickly climbed to the top of Apple’s free app download charts in the US, claiming to rival ChatGPT while boasting a fraction of the development cost.
This development had a profound impact on financial markets, triggering a 17% plunge in Nvidia’s stock value equivalent to a staggering $600 billion loss the largest single-day stock drop in US history. The event challenged the prevailing notion that AI innovation was dominated solely by American companies, signaling China’s rise as a formidable competitor with innovative AI models.
Challenging Previous Assumptions
Sid Sheth, CEO of a US AI chip startup, believes DeepSeek has paved a new path in AI model development. Until then, the dominant belief was that larger models demanding extensive computational power and hardware resources performed better. DeepSeek demonstrated that through smarter engineering, smaller, more efficient models could deliver competitive and in some benchmarks, superior performance.
Security and Political Concerns
Despite its initial popularity, privacy and data security concerns prompted many US companies to ban DeepSeek’s usage, fearing that user data might be transmitted to the Chinese government. As a workaround, users and experts suggested running DeepSeek locally on personal devices to avoid relying on servers based in China.
Furthermore, the US government has scrutinized DeepSeek’s possible ties to China’s military and intelligence agencies, with some officials expressing concerns that the company may be supporting Chinese military operations.
Shifting the Global AI Competition
Before DeepSeek, China was largely perceived as trailing the US in the development of large language models (LLMs). However, DeepSeek’s emergence revealed that China could produce competitive models at a fraction of the cost, shifting the AI competition into a new phase. Both superpowers have since increased investments and launched ambitious national strategies to maintain their AI leadership.
Following DeepSeek’s release, major US companies, including OpenAI, introduced smaller, more efficient models and adopted new strategies emphasizing resource optimization and cost reduction. Nonetheless, heavy investments in hardware, data centers, and top AI talent acquisition remain central to the industry.
Nvidia, whose stock plunged after DeepSeek’s launch, later rebounded to achieve its highest market valuation ever demonstrating that the traditional “bigger and more powerful” model still dominates AI development strategies.
Current Status and Future Challenges
Six months after its debut, DeepSeek no longer dominates headlines but continues to see use among select companies and users. Reports indicate delays in the launch of DeepSeek-R2, partly due to a shortage of advanced chips.
Experts agree that DeepSeek proved the viability of building effective AI models with fewer resources. However, the AI industry’s fierce competition demands sustained investment and extensive support for continued success.
About the author: Fateme Moradkhani covers technology, surveillance, and AI ethics for Borna News Agency, with a focus on global cyber power and digital militarization.
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