Chinese AI breakthrough shakes Silicon Valley giants
Chinese startup DeepSeek has shaken financial markets by presenting a new artificial intelligence (AI) model. The company from China unexpectedly caused a drop in stocks of Silicon Valley tech companies on Wall Street. Here’s what is known about its founder.
On Monday (27 January), there were sharp declines in tech company stocks related to AI on Wall Street. The reason was information about a new artificial intelligence model developed by the Chinese startup DeepSeek. It caused concern among investors because, as its creators claim, it was created at a fraction of the costs incurred by Silicon Valley.
Nvidia, a favourite of the AI-related boom, fell by more than 18% on Monday. There were also significant declines in Broadcom, AMD, Microsoft, Amazon, and Palantir.
So, what is DeepSeek? It is the name of a free AI-based chatbot that looks and operates very similarly to ChatGPT. "That means it's used for many of the same tasks, though exactly how well it works compared to its rivals is up for debate," the BBC emphasises.
What is DeepSeek?
The artificial intelligence model that powers it, called R1, has about 670 billion parameters, which is supposed to make it the largest open-source large language model to date, more powerful than the O1 model from OpenAI.
R1, as explained by the BBC, is a reasoning model that generates responses by simulating a process similar to how humans analyse problems or ideas. However, it is supposed to use less memory for this than American competitors, thus automatically lowering the costs of performing tasks by the Chinese programme.
DeepSeek claims it created the model for $6 (£4.8) million, a fraction compared to the "over $100 (£82) million" mentioned by Sam Altman, CEO of OpenAI, regarding the costs of creating ChatGPT4.
How was this possible? It's not completely known. Experts suggest that the founder of DeepSeek gathered 50,000 Nvidia A100 chips, whose export to China has been banned since September 2022, and successfully paired them with cheaper chips.
Who is behind DeepSeek?
Media acknowledge that not much is known about the creator of DeepSeek. The company was founded in December 2023 by Liang Wenfeng, who graduated from Zhejiang University with degrees in electronic information engineering and computer science.
"He was recently seen at a meeting hosted by China's premier Li Qiang, reflecting DeepSeek's growing prominence in the AI industry," writes the BBC.
Wenfeng has experience in finance. He is the CEO of a hedge fund called High-Flyer, which uses artificial intelligence to analyse financial data to make investment decisions. In 2019, High-Flyer became the first hedge fund in China to raise over 100 billion yuan (around £11 billion).
