Last week, Deepseek R1, a new Chinese AI model, was launched. What happened next in the US market was dramatic:
- NASDAQ 100 Index dropped by 600 points.
But why did the markets react so sharply to Deepseek?
What is Deepseek R1?
Deepseek R1 is a Chinese AI startup that has burst onto the scene, surprising the entire AI industry. It is positioned as a competitor to leading US-based language models like ChatGPT and Claude.
Why the hype?
- Cost Advantage: Deepseek R1 operates at a fraction of the cost of ChatGPT.
- Open Source: It’s completely open source, allowing businesses to build without licensing restrictions.
- Affordability:
- Deepseek R1: $2.19 per million output tokens.
- ChatGPT-4: $10.00 per million output tokens.
But the disruption caused by Deepseek goes beyond pricing.
Intriguing Facts About Deepseek R1
- Development Time: Just 2 months.
- Team Size: ~150 people.
- Total Cost: Under $6 million.
- In contrast:
- OpenAI employs over 4,000 people, raised $17.9 billion across 10 funding rounds, and is valued at $157 billion.
How is Deepseek Different?
Deepseek was built using a fraction of the advanced technology compared to ChatGPT. Yet, it has several advantages:
- Lower Cost
- 100% Open Source
- Simpler Technology
Impact on US Markets
The US market’s reaction has been overwhelmingly negative:
- NASDAQ 100 futures have plummeted.
- There’s growing concern about the valuation of US AI companies and the future demand for NVIDIA chips.
Strategic Responses from the US
The US is taking action to safeguard its AI dominance:
- Last week, former President Trump signed executive orders aimed at removing barriers to American leadership in AI.
- The Stargate Project is receiving significant funding, with $500 billion projected over the next four years.
- SoftBank CEO Masayoshi Son has committed to investing $100 billion.
Key Questions for the Future
- Can Deepseek R1 deliver practical, real-world applications?
- Will trust issues arise with an AI platform originating from China?
The answers to these questions will shape the AI landscape in the coming weeks and months.
