By Chandan Reddy 

On January 15 of this year, China launched its AI startup, Deep Seek, into the tech market. Just days later, on January 20, an upgraded version of its AI model was released, sending shockwaves through the artificial intelligence industry. Experts claim Deep Seek surpasses other AI models in quality and cost-efficiency, posing a serious challenge to established U.S.-based AI giants like Meta, OpenAI, and Nvidia.

What is Deep Seek?

Deep Seek was founded in December 2022 by Liang Wenfeng, a graduate of Zhejiang University with degrees in electronics, information engineering, and computer science. Similar to ChatGPT, Deep Seek is an AI-powered chatbot designed to enhance efficiency and simplify tasks.

Its capabilities rival OpenAI’s O1 model in mathematics and coding, and it incorporates reasoning abilities akin to R1. By integrating the best features of O1 and R1, Deep Seek has demonstrated superior accuracy in responding to human queries, solving problems effectively, generating creative ideas cost-efficiently, and utilizing less memory than its competitors.

A Disruptive Force in the Tech Industry Cost Efficiency

Deep Seek’s arrival rattled Silicon Valley, primarily due to its affordability. While U.S. companies spend an estimated $250 million on AI development, Deep Seek was developed for just $6 million—making it 30 times cheaper. This price advantage positions it as a game-changer for researchers, startups, and governments operating on tight budgets.

Cutting-Edge Chip Technology

Deep Seek’s advanced chip technology delivers high precision at a lower cost, directly challenging U.S. dominance in AI hardware. In contrast, OpenAI spends approximately

$157 billion to sustain its technological edge. Deep Seek’s ability to deliver high- performance AI at a fraction of the cost has caused a major upheaval in the AI sector.

Impact on Global Financial Markets

Deep Seek’s influence reached global financial markets on January 27, causing a downturn in the NASDAQ tech sector, which fell 3%. Nvidia suffered the biggest blow, with its stock plummeting by 17%. By January 29, Deep Seek’s disruption had pushed the U.S. chip market from first to third place in global market capitalization, dropping its value from $3.5 trillion to $2.9 trillion. The launch of Deep Seek’s newest model also triggered a $1 trillion drop in tech stock value.

Western Backlash

Deep Seek’s sudden rise has alarmed the West, particularly the United States. For years, the U.S. maintained a monopoly on AI technology, believing no competitor could rival its dominance. Deep Seek’s emergence has disrupted this assumption.

In response, the U.S. Navy has advised its personnel to avoid using Deep Seek, citing security and ethical concerns. Italy became the first country to ban the AI app from both the Apple Store and Google Play, though it remains functional on devices that had already installed it. Italian authorities cited concerns over the storage of users’ personal data on Chinese servers as the primary reason for the ban. Meanwhile, Australia has issued warnings to its citizens, urging them to avoid the Chinese-developed AI.

The West’s primary concern revolves around data privacy. Deep Seek collects extensive user data, including emails, phone numbers, chat histories, device models, operating systems, and keyboard patterns, all stored on Chinese servers. However, American AI companies also collect and store user data—albeit on U.S. servers—raising questions about double standards in AI regulations.

Another sticking point is Deep Seek’s alignment with Chinese censorship policies. When asked about politically sensitive topics such as Tiananmen Square or the Indo-China War, Deep Seek remains silent, avoiding responses that could challenge China’s official stance. This raises concerns about the AI’s ability to provide unbiased or factual information on controversial topics.

India’s Response to Deep Seek

India has shown a mixed reaction to Deep Seek. While some see its potential benefits, others are wary of data security risks.

Union Minister for Information Technology, Ashwini Vaishnaw, announced that Deep Seek would be hosted on Indian servers to address concerns over data privacy.

Meanwhile, India has expressed plans to develop its own AI, allocating $1.25 million for the initiative.

India's homegrown AI, Krutiram, has so far failed to gain traction, highlighting the need for greater government backing. The National Association of Software and Service Companies (NASSCOM) has recommended that the Indian government establish a "Deep Tech Fund" to support domestic AI development and strengthen India’s position in the global AI landscape.

Conclusion

The development of Deep Seek brought competition to the monopoly of U.S.A. in the AI industry. The US ban on exporting chips and other advanced technology, which is used for military purposes, sparked China to create its own AI. Deep Seek is economical, versatile, and powerful and is playing a larger part in the democratization of AI, proving its potential and worthiness.

However, accusations have been made that the OpenAI model was used to train Deep Seek. Additionally, China is also accused of illegally importing newer chips from Taiwan to build Deep Seek. Furthermore, Deep Seek has its own drawbacks: censorship on concerned issues and closed data policies throw a negative light on Deep Seek.