Into the deep

The emergence of DeepSeek-a Chinese AI chatbot supposedly developed at a fraction of the cost of Silicon Valley models has stunned the US tech giants and potentially opened up the artificial intelligence race to a host of other players

- Robert Booth and Dan Milmo

At 2.16pm California time on 26 January, the US billionaire tech investor Marc Andreessen called it.

"DeepSeek R1 is Al's Sputnik moment," he posted on X.

A Chinese startup, operating since 2023 and helmed by a millennial mathematician, had unveiled a new chatbot that seemed to equal the performance of America's leading models at a fraction of the cost.

Never mind that its answers on everything from the status of Taiwan to the 1989 Tiananmen Square massacre were curbed by Chinese Communist party (CCP) censors. To Andreessen, it was like the Soviet Union getting the first satellite into orbit in 1957.

The next day, shares in several of the world's biggest companies plunged including the biggest fall in US market history for microchip maker Nvidia, which lost nearly $600bn. Investors believed DeepSeek's achievement meant China would no longer need so many American chips; that US supremacy in AI was under threat or already over; and that the Silicon Valley giants, who had a week earlier announced a $500bn AI investment plan, were spending much more than they needed. The Chinese AI lab said the training cost for one of its base models had been just $5.6m.

DeepSeek's app became the most downloaded free app on Apple's app stores in the US and UK as people rushed to find out what it was about.