Chinese artificial intelligence (AI) app DeepSeek has rapidly surged in popularity, overtaking competitors such as ChatGPT to become the top-rated free app on the Apple App Store in the US, UK, and China. Its unexpected rise has had significant ripple effects in the global AI industry, triggering a sell-off in US-based AI-related companies. Major players like Nvidia, Microsoft, and Meta saw their stock prices drop as investors reacted to the emergence of a powerful Chinese AI contender.
DeepSeek’s rapid success challenges the dominant belief that the United States leads in AI innovation. It has also raised concerns over the scale of investment US companies are making in AI, with questions emerging about whether expensive AI models remain viable. Unlike its Western counterparts, DeepSeek’s researchers claim that their open-source AI model, DeepSeek-V3, was developed for less than $6 million, a fraction of the billions invested by firms like OpenAI and Google’s DeepMind. However, experts have disputed these claims, suggesting that hidden costs or alternative funding sources may have played a role in DeepSeek’s development.
A Growing AI Power Amid US Chip Restrictions
DeepSeek’s rapid advancement has also occurred against the backdrop of tightened US restrictions on semiconductor exports to China. As part of Washington’s efforts to curb China’s technological growth, access to high-end chips—essential for training advanced AI models—has been limited. In response, Chinese AI developers have had to innovate alternative solutions, such as reducing computing power requirements and optimizing AI models in ways that cut costs significantly.
According to industry experts, this has led to a surprising breakthrough: AI models now require much less computing power than previously assumed, which could significantly disrupt the industry’s existing financial structure. If DeepSeek’s approach proves scalable, it could undermine the massive investments made by Western AI giants and force a reconsideration of how AI development is funded.
DeepSeek’s breakthrough also follows OpenAI’s struggles, with CEO Sam Altman’s brief removal from the company and growing internal disputes about AI’s future direction. The Chinese AI model’s efficiency and cost-effectiveness have further intensified debates about the competitive advantage of low-cost AI solutions over high-end, expensive Western models.
DeepSeek’s Impact on Global Markets
The app’s sudden popularity has sent shockwaves through the stock market. European and Asian markets reacted negatively, with stocks in Dutch chipmaker ASML falling by more than 10% and Siemens Energy, which produces AI hardware, suffering a 21% drop. Investors are now questioning whether traditional AI development models will remain sustainable if low-cost alternatives like DeepSeek continue to gain traction.
Fiona Cincotta, senior market analyst at City Index, noted that the AI industry was caught off guard. “The idea that a low-cost Chinese AI app could suddenly disrupt the market was not widely anticipated,” she explained.
She added, “If AI models with significantly lower development costs prove effective, it will raise concerns about the profitability of Western AI firms, which have already spent billions on advanced AI infrastructure.”
Wei-Sern Ling, a Singapore-based technology consultant, warned that DeepSeek’s approach could “destabilize investment in the entire AI supply chain.” However, some analysts remain skeptical about whether China can maintain a technological edge, given ongoing US-imposed limitations on chip exports.
Who is Behind DeepSeek?
DeepSeek was founded in 2023 by Liang Wenfeng in Hangzhou, China. A graduate in information and electronics engineering, Liang had previously established a hedge fund that later became one of DeepSeek’s major financial backers.
Industry sources suggest that Liang has a stockpile of Nvidia A100 chips, which are currently banned from export to China. Reports estimate that he may have as many as 50,000 units, allowing DeepSeek to train its AI model despite restrictions. Experts believe that combining these advanced chips with cheaper, legally importable alternatives may have played a key role in DeepSeek’s ability to develop competitive AI models.
Recently, Liang was seen in discussions with high-ranking Chinese government officials, including Premier Li Keqiang, raising speculation about the extent of government support for DeepSeek’s development.
In a July 2024 interview with The China Academy, Liang acknowledged that the AI industry had underestimated the importance of pricing in global competition. “We didn’t expect pricing to be such a sensitive issue,” he said. “We’re just going at our own pace, calculating costs, and pricing accordingly.”
Is DeepSeek Safe? Privacy Concerns and Data Collection
With its increasing popularity, DeepSeek has also raised serious concerns about user privacy. Australia’s Science Minister Ed Husick has become the first Western official to publicly question the app’s security risks.
Husick told ABC News that there were “many unanswered questions” about how DeepSeek handles user data, particularly regarding “data and privacy management.” He cautioned users to exercise caution before using the app.
The US has not yet classified DeepSeek as a security threat. Former President Donald Trump called the app “an eye-opening signal” for America but dismissed concerns about data security, stating, “If it helps reduce AI costs, it could actually be beneficial.”
What Data Does DeepSeek Collect?
DeepSeek’s privacy policy reveals that the app collects a vast amount of personal data from users, storing it on secure servers in China. This includes:
- Personal details: Email addresses, phone numbers, and dates of birth provided during account creation.
- User inputs: Text, audio, and chat history submitted within the app.
- Device information: Model, operating system, IP address, and keystroke patterns used to interact with the app.
The app’s terms state that DeepSeek retains user data “for as long as necessary” and shares it with advertising partners, corporate affiliates, and service providers.
Privacy expert Lauren Hendry Parsons from ExpressVPN warned that DeepSeek’s terms allow it to track user behavior even outside the app. She described this as “a clear red flag for anyone concerned about privacy.”
Despite these concerns, some analysts argue that DeepSeek’s privacy policy is not significantly different from Western AI apps like ChatGPT or Google Gemini, which also store user inputs for “system improvements.”
Should Users Be Concerned?
Experts caution that any AI application—whether Chinese or Western—retains access to user inputs and interactions.
Emily Taylor, CEO of Oxford Information Labs, emphasized that: “Anyone working on sensitive or national security-related matters should be mindful of these risks when using AI models.”
Dr. Richard Whittle from the University of Salford added that DeepSeek does pose data privacy concerns but noted that Western AI models also have similar vulnerabilities.
Meanwhile, the UK’s Information Commissioner’s Office (ICO) has urged users to be aware of their data rights. In a statement to BBC News, the ICO emphasized that “AI developers must ensure transparency and provide users with clear information on how their personal data is used.”
Final Verdict: Is DeepSeek a Risk or a Revolution?
DeepSeek has shaken up the global AI landscape, challenging US dominance and proving that low-cost AI models can compete with billion-dollar Western projects. However, concerns remain over its data privacy policies, potential Chinese government influence, and long-term stability.
With Western regulators monitoring developments, DeepSeek’s future impact will likely depend on whether users feel comfortable entrusting their data to an AI model developed in China. For now, users should exercise caution and stay informed about their rights and risks when using AI applications.
