DeepSeek AI shakes American swagger and upends assumptions

The sudden emergence of China's artificial intelligence application, DeepSeek, has shocked the tech industry, the market, and the United States' sense of superiority in artificial intelligence (AI) at an astonishing speed, with an impact that is truly staggering. This event has not only triggered significant market volatility but also prompted a re-examination of the global AI competitive landscape.

Venture capitalist Marc Andreessen's assessment is perhaps the most incisive. He posted on X on Sunday, stating, "DeepSeek-R1 is the 'Sputnik moment' for AI," comparing it to the Soviet satellite that launched the space race. DeepSeek became the most downloaded free app on the U.S. Apple App Store over the weekend, a phenomenon that has drawn widespread attention.

On Monday, this new AI chatbot triggered a massive sell-off of major tech stocks, with shares plummeting due to heightened concerns about the U.S.'s leadership in the field. For instance, the stock of AI chip design company Nvidia plummeted by 17% at the close of U.S. markets on Monday. Even more shockingly, according to Bloomberg, its market capitalization shrank by nearly $600 billion, marking the largest single-day market cap loss in U.S. stock market history.

This extraordinary and historic panic is largely attributed to cost factors. DeepSeek's developers claim they built their latest model for just $5.6 million, sparking serious skepticism in Silicon Valley. In contrast, ChatGPT developer OpenAI spent $5 billion last year, a huge disparity that has prompted new thinking about existing AI development models.

As this dramatic moment unfolded, many usually vocal figures in Silicon Valley remained silent. Many observers, investors, and analysts seemed stunned. Some wondered if this marked a buying opportunity, while others questioned the information provided by DeepSeek. Veteran analyst Gene Munster stated on Monday, "I think the truth is still below the surface in terms of the real situation." He questioned the financial figures cited by DeepSeek and wondered if the startup had received subsidies or if its data was accurate.

Munster believes the chatbot is "surprisingly good, which is hard to believe." In his own words, DeepSeek's sudden appearance is a "show-off" by China and a "slap in the face" to the U.S. tech community. Just last week, OpenAI's Sam Altman and Oracle's Larry Ellison held a press conference with President Donald Trump, which felt more like a press release, representing the peak of U.S. optimism in AI.

They announced "Stargate," a joint venture promising up to $500 billion in private investment for AI infrastructure, including building data centers in Texas and elsewhere, and promising to create 100,000 new jobs. The U.S. seemed to believe that its abundant data centers and control over high-end chips gave it a lead in AI, despite China's dominance in rare earth metals and engineering talent. Some even took it for granted that the U.S. would dominate the AI race, although some executives issued warnings that the U.S. advantage should not be taken for granted.

The U.S. may still dominate the field, but there is a sense that DeepSeek has shaken some of America's complacency. Trump's remarks after the sudden appearance of the Chinese app might be a comfort to Altman and Ellison. He called the moment a "wake-up call" for the U.S. tech industry and said that finding a cheaper way to develop AI was ultimately a "good thing." Notably, it wasn't just tech stocks that suffered on Monday, energy stocks did too. The emergence of DeepSeek has upended many of our long-held assumptions about what is required for AI development.

Perhaps a nuclear power renaissance—including restarting the U.S.'s Three Mile Island nuclear plant—is no longer necessary. Perhaps it doesn't require that much capital, computing power, and electricity after all. Currently, the future of semiconductor giants like Nvidia remains uncertain. DeepSeek stated that its model was developed using existing technology and open-source software that anyone can use and share for free. But Wired magazine reported that over the years, DeepSeek founder Liang Wenfeng's hedge fund, High-Flyer, had been hoarding chips that form the backbone of AI, namely GPUs (graphics processing units).

The company stated that its model deployed H800 chips manufactured by Nvidia. U.S. restrictions on the sale of higher-performance chips to China may be re-examined under a new Trump administration. OpenAI's Sam Altman was mostly silent on X on Monday. But late in the day, he wrote that DeepSeek was "impressive...especially in terms of what they were able to deliver at that price point." He also wrote, "We will obviously deliver better models and it is indeed exciting to have new competitors!"

It was a satellite that truly launched the space age. There, too, the U.S. was caught off guard. How its tech industry responds to this apparent surprise from a Chinese company will be interesting, and it could inject new momentum into the AI race. The emergence of DeepSeek has undoubtedly brought new variables to the global AI development landscape and has sparked profound reflections on technological competition and innovation paths.