The Chinese artificial intelligence (AI) application DeepSeek has surpassed ChatGPT and other competitors, becoming the highest-rated free app on Apple's App Store in the US, UK, and China. Since its debut in January, the app's popularity has skyrocketed, countering the common perception that the US is the definitive leader in the AI sector. DeepSeek operates on the open-source DeepSeek-V3 model, which its developers assert was created for under $6 million—far less than the billions spent by competing companies. However, this assertion has faced skepticism from others within the AI community. Following the recent launch of DeepSeek-R1, the company claimed that its performance is on par with one of OpenAI's latest models, particularly in areas such as mathematics, programming, and natural language understanding. Silicon Valley venture capitalist and Donald Trump advisor, Marc Andreessen, referred to DeepSeek-R1 as "AI's Sputnik moment, " alluding to the Soviet Union's launch of the first artificial Earth satellite in 1957. Advanced chips facilitate the training of AI models like those of ChatGPT and DeepSeek.

However, since 2021, the US government has tightened restrictions on the sale of advanced chips to China. To maintain their progress without a reliable supply of imported advanced chips, Chinese AI developers have collaborated and explored new technological methods. This collaboration has led to the creation of AI models that require significantly less computing power than previous versions, resulting in lower costs that could potentially disrupt the industry. As a consequence, shares in US-based AI firms like Nvidia, Microsoft, and Meta saw declines on Monday morning, impacting European stock prices as well. ASML, the Dutch chip equipment manufacturer, experienced a more than 10% drop in share price, while Siemens Energy, which produces AI-related hardware, saw a plunge of 21%. Fiona Cincotta, a senior market analyst at City Index, remarked that the emergence of a cost-effective Chinese alternative was somewhat unexpected, stating, "It's a surprise to the market. " She added that the introduction of a low-cost AI model raises concerns about the profit margins of competitors, especially given their substantial investments in pricier AI infrastructure. Vey-Sern Ling, a technology equity advisor based in Singapore, told the BBC that this development could "potentially derail the investment case for the entire AI supply chain. " Nonetheless, Wall Street banking leader Citi warned that while DeepSeek may pose a challenge to the dominance of American firms like OpenAI, various obstacles faced by Chinese companies could hinder their growth. Citi analysts noted in a report, "We estimate that in an inevitably more restrictive environment, US access to more advanced chips is a significant advantage. " Last week, a consortium of US tech companies and foreign investors unveiled The Stargate Project, a venture dedicating $500 billion to AI infrastructure in Texas.