Introduction to Chinese Ripoffs in Global Markets
For every product that you can buy in markets across the world, there exists a Chinese ripoff that comes at a fraction of the cost and is equally, and sometimes even more, effective—from clothes to phones, to laptops, to refrigerators, to watches, to cars, and even the sun. This brings us to the biggest update from the tech world today.
The Launch of Deep Seek AI
A Chinese AI chatbot app has sparked chaos across global markets. The app’s launch, Deep Seek AI, is poised to wipe off a trillion dollars in value of shares of some of the world’s biggest tech companies. What is Deep Seek, and why is it causing a tech stock rout? Let’s understand now.
The Origin of Deep Seek AI
Deep Seek is a Chinese artificial intelligence company. It emerged a couple of years ago from a university startup and is based in HZA, a city in Southeastern China. The company was launched in July of 2023, but its popular AI assistance app was not released until the 10th of January this year. It was founded by Leang Wenfang, who partly funded it using money from a hedge fund that he also launched. The 40-year-old Engineering Graduate reportedly built up a store of Nvidia A100 chips, which have now been banned from export to China.
How Deep Seek AI Works ?
Experts say that these chips, around 50,000 of them, along with cheaper ones that are still available for import, led him to launch Deep Seek. So, what does Deep Seek do? Well, the app is gaining popularity for its powerful AI assistant, which operates similarly to OpenAI’s ChatGPT. The app’s description says it is designed to answer your questions and enhance your life efficiently. However, the chatbot does not answer questions on topics banned in China or those considered politically sensitive by its government, like the 1989 Tiananmen Square massacre.
Impact on Global Markets
As news of Deep Seek’s chatbot performance spread, hundreds of billions of dollars were wiped off big tech stocks in the U.S. Now, this is because Deep Seek was reportedly developed for a fraction of the cost of its American rivals, like OpenAI’s ChatGPT, Meta’s LLaMA, and Google’s Gemini. The company has been quietly impressing the AI world for some time now with its low-cost AI and tech innovations.
The Shift in AI Investment Trends
The timing of the launch has been significant, as in recent days, U.S. tech companies have pledged billions of dollars more for investment in AI. It was widely thought that large sums of money were needed to build the computing infrastructure to reach AI goals. Now, China’s Deep Seek has raised questions over this narrative.
Nvidia’s Market Impact
Nvidia, a U.S.-based company that makes the powerful chips that run AI, has been hit the worst in the tech market rout. It lost nearly $600 billion in market value on Monday, the largest one-day drop for any company in U.S. history. Its stock price plunged 17.7% over the day. Nvidia had been the most valuable company in the world but fell to third place after Apple and Microsoft on Monday.
Should U.S. Tech Companies Be Worried?
So, should Nvidia and other U.S. tech companies be worried? Deep Seek uses less advanced semiconductor chips than the ones created by Nvidia. The success of Deep Seek undercuts the belief that bigger budgets and top-class chips are the only ways of advancing AI. It has created massive uncertainty about the need and future of high-performance chips, and many tech companies are wondering if they now need to buy as many of Nvidia’s tools.
Geopolitical Implications of Deep Seek’s Success
Deep Seek’s emergence across the world comes at a time when the U.S. is restricting the sale of advanced chip technology that powers artificial intelligence to its rival China. Silicon Valley venture capitalist and Trump adviser Mark Andreessen described Deep Seek’s R1, which claims to perform on par with OpenAI’s GPT-4 model, as AI’s Sputnik moment. He was referring to the Soviet Union’s satellite launch in 1957, which kicked off the space race. At that time, the U.S. was considered to have been caught off guard by its rival’s achievement, and today, Washington seems to be standing at the same juncture in the world of artificial intelligence.
Expert Insights on Deep Seek AI
For more on this, we have with us Gri Hul, a senior researcher in data ethics and power and the co-founder of Data Ethics in Denmark. She helps us understand the significance of Deep Seek AI.
The Challenge to Traditional Tech Giants
What makes Deep Seek AI a significant threat to established tech giants like Nvidia, OpenAI, and Google, particularly in terms of innovation and cost efficiency? As you said, in the global AI race, big tech companies have been dominant, requiring significant investments. Now, a small Chinese startup is doing the same thing as OpenAI’s ChatGPT for a lot less money. The huge threat is the shift in the game’s rules.
The Future of AI Development with Fewer Resources
How does Deep Seek’s ability to function with less advanced semiconductor chips challenge the prevailing narrative that cutting-edge AI development requires high-performance chips and massive budgets? Deep Seek is building on existing knowledge and attracting talent from top universities, and their use of fewer chips may signal a change in how AI is developed globally.
Geopolitical Ramifications for AI Innovation
What are the potential geopolitical implications of Deep Seek’s success, especially considering the U.S. export restrictions on advanced chip technology to China and the growing rivalry in AI innovation? The parameters of the global AI race are changing, as Deep Seek challenges the existing narrative that investment and infrastructure are the main drivers of AI development.
Conclusion: Changing the AI Landscape
Thank you, Gri Hul, for being with us on First Post and helping us understand the latest developments in the AI race. From breaking news to the day’s biggest controversies, catch it all on Spotlight at 6:00 PM Indian Time and 12:30 GMT, only on First Post.
