DeepSeek’s new AI chatbot shocks US tech giants, possible crash expected

Chinese firm DeepSeek‘s artificial intelligence chatbot, developed for only $5.6 million, has shaken up the tech industry and hit U.S. titans, including Nvidia and Meta, which have spent vast sums to get ahead in the AI race.

While it soared to the top of the Apple Store’s download charts, shares in major tech firms in the U.S. and Japan have tumbled as the industry takes stock of the challenge. By 11:40 a.m. GMT, GPU giant Nvidia’s stock had fallen by over 11%, losses at semiconductor manufacturer TSMC exceeded 10%, Meta approached a 5% loss, and AMD dropped by 6%, according to investing.com data.

What is DeepSeek?

DeepSeek was developed by a startup based in the eastern Chinese city of Hangzhou, known for its high density of tech firms.

Available as an app or on a desktop, DeepSeek can do many of the things that its Western competitors can—write song lyrics, help work on a personal development plan, or even write a recipe for dinner based on what’s in the fridge. It can communicate in multiple languages, though it told Agence-France Presse (AFP) that it was strongest in English and Chinese.

It is subject to many of the limitations seen in other Chinese-made chatbots like Baidu’s Ernie Bot—asked about leader Xi Jinping or Beijing’s policies in the western region of Xinjiang, it implored AFP to “talk about something else”. But from writing complex code to solving difficult sums, industry insiders have been astonished by just how well DeepSeek’s abilities match the competition.

“What we’ve found is that DeepSeek … is the top performing, or roughly on par with the best American models,” Alexandr Wang, CEO of Scale AI, told CNBC.

That’s all the more surprising given what is known about how it was made. In a paper detailing its development, the firm said the model was trained using only a fraction of the chips used by its Western competitors.

Just last week following his inauguration, U.S. President Donald Trump announced a $500-billion venture to build infrastructure for AI in the U.S on Jan. 21.

Tech giants Japanese SoftBank, U.S-based Oracle, and OpenAI, developer of ChatGPT, the most popular AI chatbot until DeepSeek’s debut, had agreed to venture a company named Stargate, to meet AI’s voracious computing needs.