The rapid impact of the new Chinese AI app, DeepSeek, on the technology landscape, financial markets, and perceptions of American dominance in AI has been remarkable. Marc Andreessen aptly described DeepSeek-R1 as "AI's Sputnik moment, " alluding to the satellite that initiated the space race. The app became the most downloaded free app on Apple's US App Store, leading to a significant sell-off of major tech stocks by Monday, as concerns about America's standing in AI grew. Nvidia, a prominent AI chip manufacturer, saw its shares drop 17%, losing nearly $600 billion in market value—reportedly the largest loss in US stock market history. This upheaval stemmed primarily from DeepSeek's development costs.

While OpenAI incurred $5 billion in expenses last year alone, DeepSeek's creators claim to have developed their model for just $5. 6 million, a fraction of the costs incurred by major AI players like OpenAI and Google. The immediate repercussions of DeepSeek's launch left many in Silicon Valley in shock, leading to questions about its financial backing and claims. Analyst Gene Munster expressed skepticism about whether DeepSeek's metrics were accurate or potentially subsidized, noting the chatbot's surprising effectiveness as a point of contention. DeepSeek's emergence represents a "flex" by China and a setback for US tech, particularly striking given last week's peak American optimism about AI showcased by OpenAI's Sam Altman and Oracle's Larry Ellison, who touted a $500 billion investment in AI infrastructure with the promise of job creation. Despite expected American superiority in the sector, DeepSeek's rise has prompted a reassessment of the resources needed for AI development, suggesting that the traditional assumptions about capital and energy may be changing. For now, the futures of semiconductor giants like Nvidia remain uncertain.