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DeepSeek AI chatbot bursts onto the scene—is the US losing its tech edge to China?

China-based artificial intelligence (AI) startup DeepSeek's release of new AI models that rival those made by leading U.S. tech firms roiled markets on Monday and prompted concerns about U.S. firms losing their edge in the AI race to Chinese rivals.

DeepSeek released its R1 AI model last week which it said is 20 to 50 times cheaper to use than ChatGPT-maker OpenAI's o1 model, depending on the task, according to a post on the company's official WeChat account.

DeepSeek's AI assistant, powered by its new DeepSeek-V3 model, vaulted past ChatGPT to the top of Apple's App Store. The company said that the model was trained with less than $6 million worth of computing power from what it said were 2,000 Nvidia H800 chips to achieve a level of performance on par with the most advanced models from OpenAI and Meta. The startup also rolled out its updated image generation model called Janus-Pro on Monday.

The advancements made by DeepSeek with what it reported as being fewer, lower capability chips and a lower cost than spending on AI training by U.S. rivals prompted a market sell-off and a debate over whether the Chinese firm has upended American firms' edge in the AI race.

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DeepSeek's AI chatbot
DeepSeek's AI chatbot blocked questions critical of the Chinese Communist Party, a FOX Business review found.(Photo Illustration by Justin Sullivan/Getty Images / Getty Images)

 

Marc Andreessen, co-founder and general partner of venture capital firm Andreessen Horowitz, wrote in a post on X that "Deepseek R1 is AI's Sputnik moment," in reference to the Soviet Union's early lead over the U.S. in the Cold War era Space Race.

Anthropic co-founder Jack Clark wrote in his "Import AI" newsletter, "R1 is significant because it broadly matches OpenAI's o1 model on a range of reasoning tasks and challenges the notion that Western AI companies hold a significant lead over Chinese ones."

While some tech sector figures and investors in the AI space see DeepSeek's advancements as signaling the arrival of a new phase of AI competition, others are less convinced that it poses a broad challenge to the U.S. tech industry.

 

Image of DeepSeek
Chinese AI startup DeepSeek roiled markets with the release of its new AI models. (Getty Images / Getty Images)

 

Dan Ives, managing director and global head of technology research at Wedbush Securities, wrote Monday in a note to investors that while DeepSeek's LLM has clearly impressed the tech sector, it shouldn't be viewed as a rival to more capable companies like Nvidia at this stage.

"No U.S. Global 2000 is going to use a Chinese start-up DeepSeek to launch their AI infrastructure and use cases," Ives wrote. "At the end of the day there is only one chip company in the world launching autonomous, robotics, and broader AI use cases and that is Nvidia. Launching a competitive LLM model for consumer use cases is one thing… launching broader AI infrastructure is a whole other ballgame and nothing with DeepSeek makes us believe anything different."

Ives sees the tech sector selloff spurred by DeepSeek's emergence as an opportunity to invest in tech companies that are active in the AI space.

"These are just the opportunities to own the Nvidia, Microsoft, Alphabet, Palantir, Salesforce, Amazon and broader tech ecosystem that is under heavy pressure today," he wrote amid Monday's selloff. "DeepSeek impressed the tech community with this LLM model… but this is not launching 100x the capacity/algorithms that is needed to even consider this a competitive threat in our view."

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DeepSeek AI
DeepSeek's AI assistant topped OpenAI's ChatGPT in the Apple App Store. (Christoph Dernbach/picture alliance via Getty Images / Getty Images)

 

Mark Malek, CIO at Siebert, observed in a note that while OpenAI's ChatGPT and other models have "vast capabilities in natural language processing, while DeepSeek is created to be task-specific." 

Malek asked in his note: "Who or what was challenged by DeepSeek's outing this weekend? Was it the hyperscalers, data security companies, network equipment makers, chipmakers, IC design software providers, AI users, etc?" 

"No, on notice should be LLM (large language model) AI models like OpenAI, Google DeepMind, Anthropic (Claude), and maybe Meta's LLaMA," he explained. "Now let's remember that these are software companies with vast resources that can easily modify their algorithms to reflect the current state of research."

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"Did DeepSeek seek and find a more efficient processing model for AI? Maybe, but you can count on the incumbents to adopt any new techniques found, no matter who finds them. It is the basis for a competitive and rich market," Malek wrote.

Author: Eric Revell

Source: Fox News:

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