This Chinese AI App Just Overtook ChatGPT
A week after banning TikTok from app stores (no, it still can’t be downloaded) and a day after threatening 25% tariffs on Colombia, the US has dealt a major blow in its ongoing trade wars – overnight Silicon Valley appears to have lost. its AI dominance.
The shake-up follows the release of fresh Chinese artificial intelligence startup DeepSeek, which on January 20 updated its ChatGPT-like artificial intelligence assistant with the open-source R1 reasoning model . According toDeepseek testing , the R1 model matches OpenAI’s o1 reasoning model in several metrics, while being much cheaper to develop.
The Wall Street Journal was the first to report the ultra-low cost of developing DeepSeek R1, citing the year-old company’s claims that the new model cost just $5.6 million to develop, compared to the more than $100 million OpenAI paid for its equivalent.
The news took a while to spread, but as a result, DeepSeek rose to the top of the App Store, displacing ChatGPT as the most downloaded free app. The sudden surge in attention weighed on US stocks, with the Dow falling about 0.22%, the S&P down 2% and the Nasdaq down 3.6%. In particular, shares of Google’s parent company Alphabet fell 2.89%, with shares of Meta, Oracle and other tech giants also posting significant declines. Notably, shares of data center and graphics card company Nvidia, which supplies much of the hardware for artificial intelligence development, fell 11.64%.
The drop in Nvidia shares in particular is likely due to DeepSeek’s claims that it only needs about 2,000 custom Nvidia chips to train its latest artificial intelligence model, while leading US models typically use about 16,000 chips. These claims are still awaiting verification, but if confirmed, it would expose holes in recent U.S. policy efforts to limit the number of U.S. chips Chinese developers can use.
On the consumer side, DeepSeek promises cheaper access to higher-end models than ChatGPT, which provides basic access to its o1 model with the $20/month ChatGPT Plus subscription and unlimited access to the o1 model with the pricey $200/month ChatGPT Pro . plan. Unfortunately, the company seems to be experiencing success right now: the servers are overloaded and I am currently unable to register for an account to test. It’s likely that the more people who walk by and get their hands on these models, the easier it will be to test just how afraid American companies should be of DeepSeek.
However, the competition could be a blow to the nose for US AI developers, who along with President Trump just announced the $500 billion ” Project Stargate ” – an initiative to build artificial intelligence infrastructure in the US, starting with a plan to build infrastructure worth 100 billion dollars. Our data centers are in Texas.