According to Trump, DeepSeek is a “wake-up call” for US IT companies
US President Trump Labels DeepSeek’s AI Breakthrough “A Wake-Up Call” for US Tech Industry
The emergence of Chinese company DeepSeek and its AI model, R1, has sent shockwaves through Wall Street, with President Donald Trump describing it as “a wake-up call” for the US tech sector.
Shares in major US tech firms, including Nvidia, took a sharp hit, with the chip giant losing nearly $600 billion (£482 billion) in market value. DeepSeek’s claim that its R1 model was developed at a fraction of the cost of its competitors has raised serious questions about the future of US dominance in artificial intelligence and the scale of investments needed to maintain a competitive edge.
In just one week since its launch, DeepSeek has become the most downloaded free app in the US.
Commenting on the development, Trump suggested the cost efficiency of DeepSeek’s model could be “a positive” for the US, saying, “If you could do it cheaper, if you could do it for less and get to the same end result, I think that’s a good thing for us.” Speaking aboard Air Force One, he dismissed concerns about the breakthrough, reaffirming that the US would remain dominant in the AI sector.
However, DeepSeek’s rapid rise has sparked cybersecurity concerns in some countries. Australia’s science minister, Ed Husic, called for caution, telling ABC, “There are a lot of questions that will need to be answered in time on quality, consumer preferences, data, and privacy management.”
Cost Efficiency and Controversy
DeepSeek’s open-source R1 model, built on DeepSeek-V3, was reportedly trained for around $6 million (£4.2 million)—a stark contrast to the billions spent by US rivals. If accurate, this development could significantly disrupt the AI industry by lowering the cost of training advanced models. However, some experts have challenged the claim, alleging that DeepSeek has access to around 50,000 Nvidia chips, which are now banned from export to China. Tech billionaire Elon Musk responded to the claim with a skeptical “Obviously” on social media.
Rising Tensions and Shifting Dynamics
DeepSeek’s emergence comes amid US restrictions on the export of advanced chip technology to China, which has led Chinese developers to collaborate and explore alternative approaches. This has resulted in AI models requiring far less computing power, potentially reshaping the industry and lowering costs beyond previous expectations.
DeepSeek claims its R1 model can operate on just 2,000 specialized chips compared to the estimated 16,000 needed for leading US models. Experts like Marina Zhang, Associate Professor at the University of Technology Sydney, highlighted that DeepSeek’s success demonstrates how software efficiency can offset hardware limitations.
Ion Stoica, co-founder and executive chair of Databricks, emphasized the potential market impact: “The lower cost of DeepSeek could spur more companies to adopt AI in their business. If that happens, this reduction in cost can accelerate the progress of AI, expanding the market faster.”
Mixed Market Reactions
While US markets showed signs of recovery, with Nasdaq futures up 0.1% and Nvidia stocks ticking up slightly in after-hours trading, the ripple effects were felt globally. Japan’s AI-related firms, including Advantest, SoftBank, and Tokyo Electron, saw sharp declines, pushing the Nikkei 225 down 1.4%. Meanwhile, markets in China remain closed for the Lunar New Year holiday and will reopen on February 5.
About DeepSeek
Founded in 2023 by Liang Wenfeng in Hangzhou, southeastern China, DeepSeek has quickly become a global name. Liang, a graduate in information and electronic engineering, also founded the hedge fund that backed DeepSeek. He recently attended a meeting with Chinese Premier Li Qiang and revealed in a 2024 interview with The China Academy that his team did not anticipate pricing to become such a controversial issue.
DeepSeek’s R1 model boasts performance comparable to some of OpenAI’s latest technologies in tasks like mathematics, coding, and natural language reasoning. OpenAI CEO Sam Altman described the model as “impressive” but noted that OpenAI would continue to deliver superior models in the future.
As the AI race heats up, DeepSeek’s disruptive cost structure and rapid adoption signal a pivotal moment in the global competition for technological supremacy. Whether its claims stand up to scrutiny or not, its impact on the industry is undeniable.
