This may be of interest to establish why the "DeepSeek" arrival...

This may be of interest to establish why the "DeepSeek" arrival has spooked global markets.

What is DeepSeek, and why did the AI startup cause US tech stocks to fall? - ABC News

What isDeepSeek, and why did the AI startup cause US tech stocks to fall?

DeepSeek has caused concern in the US tech industry as it increasingly becomes a competitor to ChatGPT. (Reuters: DadoRuvic/Illustration)

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A frenzy over an artificial intelligence (AI) chatbot made by Chinese tech startup DeepSeek has up-ended US stock markets fuelled a debate over the economic and geopolitical competition between the US and China.

DeepSeek's AI assistant became the number one downloaded free app on Apple's App Store Monday, propelled by curiosity about the ChatGPT competitor.

Part of what is worrying some US tech industry observers is the idea that the Chinese startup has caught up with the American companies at the forefront of generative AI at a fraction of the cost.

If true, that would call into question the huge amount of money US tech companies say they plan to spend on the technology.

But hype and misconceptions about DeepSeek's technological advancements also sowed confusion.

Here's what you need to know.

What is DeepSeek?

The startup was founded in 2023 in Hangzhou, China and released its first AI large language model later that year.

Its CEO Liang Wenfeng previously co-founded one of China's top hedge funds, High-Flyer, which focuses on AI-driven quantitative trading.

Photo shows An assumed ai generated image of cranes on a bluesky as an oil painting

The US president says Stargate will build the physical and virtual infrastructure to power the next generation of advancements in AI.

DeepSeek began attracting more attention in the AI industry last month when it released a new AI model that it boasted was on par with similar models from US companies such as ChatGPT maker OpenAI, and was more cost effective.

The chatbot became more widely accessible when it appeared on Apple and Google app stores this year.

But it was a follow-up research paper published last week — on the same day as President Donald Trump's inauguration — that set in motion the panic that followed.

That paper was about another DeepSeek AI model called R1 that showed advanced "reasoning" skills — such as the ability to rethink its approach to a maths problem — and was significantly cheaper than a similar model sold by OpenAI called o1.

"What their economics look like, I have no idea," Bernstein analyst Stacy Rasgon, said.

"But I think the price points freaked peopleout."

DeepSeek claims to be more cost-effective in its use of expensive Nvidia chips to train the system on huge troves of data. (ReutersadoRuvic/Illustration/File Photo)

What does this have to do with Trump?

Behind the drama over DeepSeek's technical capabilities is a debate within the US over how best to compete with China on AI.

"Deepseek R1 is AI's Sputnik moment," said venture capitalist Marc Andreessen in a Sunday post on social platform X.

The post is in reference to the 1957 satellite launch that set off a Cold War space exploration race between the Soviet Union and the US.

Mr Andreessen, who has advised Mr Trump on tech policy, has warned that over-regulation of the AI industry by the US government will hinder American companies and enable China to get ahead.

Photo shows Laptop on desk with chatGPT displayed on screen

Generative artificial intelligence tools like OpenAI's ChatGPT should be deemed "high-risk" under dedicated legislation that could enable the most dangerous technologies to be banned, a bipartisan committee recommends.

But the attention on DeepSeek also threatens to undermine a key strategy of US foreign policy in recent years to restrict the sale of American-designed AI semiconductors to China.

Some experts on US-China relations do not think that is an accident.

"The technology innovation is real, but the timing of the release is political in nature," said Gregory Allen, director of the Wadhwani AI Center at the Center for Strategic and International Studies.

Mr Allen compared DeepSeek's announcement last week to US-sanctioned Chinese company Huawei's release of a new phone during diplomatic discussions over Biden administration export controls in 2023.

"Trying to show that the export controls are futileor counterproductive is a really important goal of Chinese foreign policy rightnow," Mr Allen said.

Mr Trump signed an order on his first day in office last week that said his administration would "identify and eliminate loopholes in existing export controls", signalling that he was likely to continue and harden Mr Biden's approach.