China's DeepSeek AI dethrones ChatGPT on App Store: Here's what ...
On Monday, Chinese artificial intelligence startup DeepSeek took over rival OpenAI's coveted spot as the most-downloaded free app in the U.S. on Apple's App Store, dethroning ChatGPT for DeepSeek's AI Assistant. Global tech stocks sold off and were on pace to wipe out billions in market cap.
DeepSeek's Success and Challenges
Later on Monday, DeepSeek said it would temporarily limit user registrations "due to large-scale malicious attacks" on its services, though existing users will be able to log in as usual.
Tech leaders, analysts, investors, and developers say that the hype — and ensuing fear of falling behind in the ever-changing AI hype cycle — may be warranted. Especially in the era of the generative AI arms race, where tech giants and startups alike are racing to ensure they don't fall behind in a market predicted to top $1 trillion in revenue within a decade.
Origin and Growth of DeepSeek
DeepSeek was founded in 2023 by Liang Wenfeng, co-founder of High-Flyer, a quantitative hedge fund focused on AI. The AI startup reportedly grew out of the hedge fund's AI research unit in April 2023 to focus on large language models and reaching artificial general intelligence, or AGI — a branch of AI that equals or surpasses human intellect on a wide range of tasks, which OpenAI and its rivals say they're fast pursuing. DeepSeek is still wholly owned by and funded by High-Flyer, according to analysts at Jefferies.
The buzz around DeepSeek began picking up steam earlier this month, when the startup released R1, its reasoning model that rivals OpenAI's o1. It's open-source, meaning that any AI developer can use it, and has rocketed to the top of app stores and industry leaderboards, with users praising its performance and reasoning capabilities.
Industry Impact and Speculations
Shares of Nvidia fell nearly 17% on Monday by market close, with chipmaker ASML down nearly 6%. The Nasdaq dropped more than 3%. Four tech giants — Meta, Microsoft, Apple, and ASML are all set to report earnings this week.
Analysts at Raymond James detailed some of the questions plaguing the AI industry this month, writing, "What are the investment implications? What does it say about open sourced vs. proprietary models? Is throwing money at GPUs really a panacea? Are U.S. export restrictions working? What are the broader implications of [DeepSeek]? Well, they could be dire, or a non-event, but rest assured, the industry is abuzz with disbelief and speculation."
Response from Industry Leaders
Some American tech CEOs are clambering to respond before clients switch to potentially cheaper offerings from DeepSeek, with Meta reportedly starting four DeepSeek-related "war rooms" within its generative AI department. Microsoft CEO Satya Nadella wrote on X that the DeepSeek phenomenon was just an example of the Jevons paradox, writing, "As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can't get enough of."
Changing Landscape of AI Sector
News of DeepSeek's prowess also comes amid the growing hype around AI agents — models that go beyond chatbots to complete multistep complex tasks for a user — which tech giants and startups alike are chasing. Meta, Google, Amazon, Microsoft, OpenAI, and Anthropic have all expressed their goal of building agentic AI.
Anthropic, the Amazon-backed AI startup founded by ex-OpenAI research executives, ramped up its technology development throughout the past year, and in October, the startup said that its AI agents were able to use computers like humans to complete complex tasks.
