TECHNOLOGY: The Race for AI Dominance

The sudden success of Chinese artificial intelligence startup DeepSeek took the tech world by surprise. Newsweek explores the impact on the U.S.'s lead in the industry

- MICAH MCCARTNEY, SHANE CROUCHER and THEO BURMAN

CHINESE STARTUP DEEPSEEK HAS SENT SHOCK waves through the artificial intelligence world and created a headache for the United States.

Its AI assistant overtook Western rival ChatGPT on January 27 to become the top-rated free app on Apple's App Store in the U.S., delivering a trilliondollar blow to U.S. tech firms on the stock market.

The OpenAI rival sent a sobering message to both Washington and Silicon Valley, showcasing China's erosion of the U.S. lead in a critical tech battleground. Newsweek contacted DeepSeek, OpenAI and the U.S.'s Bureau of Industry and Security via email for comment.

DeepSeek, a little-known company in Hangzhou, China, is the brainchild of Liang Wenfeng, a former hedge fund manager who transitioned to AI development in 2023. Liang told Asia Tech Review: "This is about democratizing innovation."

His platform's flagship model, DeepSeek-R1, sparked the largest single-day loss in stock market history, wiping billions off the valuations of U.S. tech giants like OpenAI minority owner Microsoft and chipmakers Nvidia and Broadcom last month. The brutal selloff stemmed from concerns that DeepSeek, and thus China, had caught up with American firms at the forefront of generative AI-at a fraction of the cost.

DeepSeek claims that it trained its models in two months for $5.6 million and using fewer chips than typical AI models. U.S.-based OpenAI was reported to have spent around $100 million to develop GPT4. Gary Marcus, a cognitive scientist and an author of Rebooting. AI, told Newsweek: "Nobody has landed on the moon yet, or will they soon, but China has basically caught up to the U.S. in the flawed and faddish techniques of generative AI."

While DeepSeek's budget claim has been disputed by some in the AI world, who generally argue that it used existing technology and open source code, others disagree. Nabil Jawdat Sarhan, associate professor of Electrical & Computer