DeepSeek a 'wake-up call' for US tech firms, Trump says

US President Donald Trump has described the rise of Chinese company DeepSeek as a "wake-up call" for the US tech sector, following the release of its artificial intelligence (AI) model that has sent shockwaves through the market. DeepSeek’s model, the R1, claims to have been created at a fraction of the cost of its competitors, sparking concerns over the future of American AI dominance. The news caused shares in major tech firms like Nvidia to plummet, with Nvidia losing nearly $600bn in market value.

DeepSeek’s rapid success is evident, as its app became the most downloaded free app in the US just one week after launch. Trump, however, downplayed the development, stating that if AI can be developed cheaper and still achieve similar results, it could ultimately benefit the US. Despite this, he emphasized that the US will continue to lead in the field.

The emergence of DeepSeek has raised security concerns, with Australian officials urging caution. DeepSeek’s AI is powered by the open-source DeepSeek-V3 model, which was trained for about $6m, far cheaper than the billions spent by rivals. However, some in the industry have questioned the validity of this claim.

This breakthrough comes as the US has imposed restrictions on the sale of advanced chips used in AI development to China, prompting Chinese AI developers to collaborate and experiment with alternative methods, resulting in models that require far less computing power and cost significantly less.

Following the market shock, European stock markets remained resilient, while shares in Japanese AI-related companies took a hit. The founder of DeepSeek, Liang Wenfeng, established the company in 2023 in Hangzhou, China, and has been surprised by the sensitivity around pricing, noting that the company simply aimed to calculate costs and set prices accordingly.

DeepSeek’s R1 model has been compared to leading AI models, with some experts praising its performance, especially considering the lower cost. However, some, including Elon Musk, have questioned the accuracy of the company’s claims regarding its hardware. Despite the doubts, DeepSeek's ability to rival US models has sparked discussions about the potential for accelerated AI adoption due to its reduced cost, which could expand the market at a faster pace.