DeepSeek, a Chinese AI startup, has surpassed OpenAI’s ChatGPT in downloads on the Apple App Store in the U.S. just a week after its release. This marks a significant shift in the AI landscape and highlights the growing competition against established names like OpenAI, Google, and Microsoft. Aravind Srinivas, CEO of Perplexity AI, congratulated DeepSeek on social media platform X, stating, “Congrats to DeepSeek for getting to #1 on the App Store.
“The result is that, just as China has brought down the fixed cost of building models, so the marginal cost of querying them is going up. If those two trends continue, the economics of the tech industry would invert”.
https://t.co/a4MIHbesmJ— Olivier Schmitt (@Olivier1Schmitt) January 24, 2025
It wasn’t clear who would beat ChatGPT for the first time for a while. The best we could manage was #8 a year ago. Look forward to using all their models for search, assistant, and agents this year.”
A lot of the discussion over DeepSeek focuses on which companies win & lose. For everyone not working at an AI lab, the implications are a little clearer: we will continue to see accelerated AI development, & the odds of hitting major roadblocks decreases as more labs experiment
— Ethan Mollick (@emollick) January 26, 2025
https://t.co/DKtzyusgpQ via @NYTimes low cost AI chip design is edging out bigger rivals. Can Indian startups emulate this Chinese start up?
— Kiran Mazumdar-Shaw (@kiranshaw) January 26, 2025
DeepSeek R1, developed by Hangzhou-based startup DeepSeek, is an advanced large-language model to enhance reasoning and analytical capabilities.
It uses a hybrid architecture incorporating reinforcement learning and chain-of-thought reasoning. The model is available in two versions: DeepSeek-R1 and DeepSeek-R1-Zero, with the latter offering unsupervised fine-tuning for superior reasoning abilities. The rapid rise in popularity of DeepSeek can be attributed to its competitive pricing and impressive performance.
DeepSeek R1 offers a much lower rate at $0.55 per million input tokens than OpenAI’s model, which charges $15 per million. Moreover, the model has shown superior performance in coding tasks, achieving a 97% success rate and outperforming OpenAI in specific benchmarks. Users have praised DeepSeek R1’s seamless smartphone performance and aptitude for handling complex tasks like mathematical computations.
DeepSeek has also released compact versions of its R1 model, making it accessible for use on laptops and other devices.
DeepSeek’s rapid rise in AI market
Those interested in exploring DeepSeek R1 can do so through its chat interface at [chat.deepseek.com](http://chat.deepseek.com).
The DeepSeek Developer Portal canintegrate the model into applications by obtaining API keys. The overwhelming popularity of DeepSeek’s inexpensive AI model has sparked a selloff in AI-related shares, with megacap stocks like Nvidia taking a significant hit. Nasdaq futures tumbled on Monday due to this development, which challenges the widespread assumption that AI will dramatically drive demand from chipmakers to data centers.
Richard Hunter, head of markets at Interactive Investor, stated, “It is far too early to describe DeepSeek as an existential threat to U.S.-based AI solutions. It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry that has powered much of the gain seen in the main indices over the past couple of years.
Nvidia, often considered the poster child of AI, dropped 6.9% in premarket trading, while other chipmakers such as AMD and Micron Technology fell 3.7% and 6.4%, respectively. Microsoft and Meta Platforms were down 3.3% each, with both companies set to report earnings later this week, along with Apple and Tesla.
Google-parent Alphabet fell 3.2%, and Apple lost 1.4%. AI server makers Dell Technologies and Super Micro Computer slid about 8% each at 4:06 a.m. ET, Dow E-minis were down 472 points, 1.06%, S&P 500 E-minis were down 120.25 points, 1.96%, and Nasdaq 100 E-minis were down 667 points, or 3.04%.
The U.S. Federal Reserve’s first interest rate decision of the year is expected on Wednesday, with markets widely anticipating the central bank will hold its lending rate steady. The December reading of the personal consumption expenditures (PCE) is due on Friday, a crucial metric in assessing the inflation trajectory. Energy major Exxon Mobil, United Parcel Service, and planemaker Boeing are among the other industry leaders set to report their quarterly results later this week.
