Nvidia Stock Soars As Chinese Startup Challenges Ai Status Quo With Revolutionary Free Chatbot

The Chinese startup DeepSeek has sent shockwaves through the tech industry with its free AI chatbot, which became the number one most-downloaded app in Apple’s US App Store over the weekend. The company claims that its model, called R1, rivals OpenAI’s current industry leader, but what stunned the industry was that DeepSeek built its model using only a small fraction of the specialized computer chips that AI companies typically need to develop cutting-edge systems.

Nvidia saw more than $460 billion erased from its market capitalization on Monday, a drop characterized by Bloomberg as the “biggest in US stock market history.” The shakeup stems from an open source model developed by DeepSeek called R1, which debuted earlier this month. The company said that it challenges the notion that Western AI companies hold a significant lead over Chinese ones.

Venture capitalist Marc Andreessen called DeepSeek’s achievement “AI’s Sputnik moment,” referencing the Soviet satellite that launched the space race in the 1950s. Jack Clark, cofounder of the AI startup Anthropic, wrote in his newsletter that DeepSeek’s R1 model “challenges the notion that Western AI companies hold a significant lead over Chinese ones.”

Cheng Lu, a research scientist at OpenAI, said that DeepSeek’s chatbot demonstrated impressive Chinese conversational skills. “It’s the first time I can feel the beauty of Chinese language created by a chatbot,” he said in an X post on Sunday.

DeepSeek’s AI assistant is currently available for free and comes with three main functions. First, users can ask the chatbot questions and receive direct answers. Second, there’s a search mode that surfaces answers from the internet. Lastly, there’s a “DeepThink” mode that allows users to tap into DeepSeek’s R1 model, which was built upon the company’s existing V3 model.

Despite these limitations, DeepSeek’s free chatbot could pose a serious threat to competitors like OpenAI, which charges $20 per month to access its most powerful AI models. Unlike its Chinese counterpart, OpenAI doesn’t disclose the underlying “weights” of its models, which determine how the AI processes information. It also has declined to make public the full “chains of thought” produced by its own reasoning models.

The success of Chinese firm DeepSeek suggests tech companies can train and run powerful AIs without consuming vast amounts of power. This challenges the view that US tech bosses have demanded a vast expansion of data centres and energy infrastructure to support further progress and widespread uptake of the technology.

Some in the industry think DeepSeek’s algorithmic advances could lead to sweeping changes in the way AI models are developed and used, as well as significant energy savings and a lower climate burden.