Based out of the eastern Chinese city of Hangzhou -- sometimes known as "China's Silicon Valley" -- DeepSeek has come seemingly out of nowhere to release a cutting-edge product.
But in China it was already making waves, last year dubbed the "Pinduoduo of AI" -- a reference to a popular online shopping app that steamrolled big players like Alibaba with its low prices.
DeepSeek has won plaudits for its cost-effectiveness and praise in China for its seeming ability to navigate US sanctions that have aimed to prevent access to the high-tech chips needed to power the AI revolution.
AFP paid visits to the firm's offices in both Hangzhou and the capital Beijing on Tuesday, but offices appeared closed for the Lunar New Year holidays.
The firm is the child of tech and business prodigy Liang Wenfeng, born in 1985 and an engineering graduate of Hangzhou's prestigious Zhejiang University, where he has said he became convinced "artificial intelligence would change the world".
He spent years trying to work out how to apply AI to a number of different fields, according to an interview with Chinese investment news outlet Waves last year.
But he eventually struck gold with High-Flyer, a quantitative investing firm specialising in using AI to analyse stock market patterns.
That technique brought in tens of billions of yuan in assets managed, and made it one of China's top quantitative hedge funds.
"We just do things according to our own pace, then calculate costs and prices," Liang told Waves.
"Our principle is to not subsidise or make a huge profit."
- 'More a geek than a boss' -
For Liang, DeepSeek was always a passion project.
In 2021, the Financial Times reported, he began purchasing Nvidia graphic processing units for a side project -- an account also featured in a local media report on the firm.
Associates told Waves he is "not at all like a boss and much more like a geek", with a "terrifying ability to learn".
And his passion project has now shocked industry experts and triggered a plummet in the shares of US chip-making giant Nvidia.
It also brought Liang right into the corridors of power.
Last week, he appeared in a lineup of other key business representatives meeting with China's second-ranking leader, Premier Li Qiang, at a seminar to solicit opinions on the government's economic work for the year ahead.
Footage of the meeting from Chinese state broadcaster CCTV showed a moppy-haired Liang wearing thick-rimmed glasses addressing Li, who sat listening intently from his chair opposite.
- 'Wake-up call' -
Beijing has good reason to be pleased: DeepSeek's success called into question the vast sums of money funnelled by tech giants into developing advanced generative AI, as well as the ability of Western sanctions to prevent Chinese competitors from keeping up -- or even winning.
US President Donald Trump said it was a "wake-up call" for Silicon Valley, and tech investor and ally Marc Andreessen declared it was "AI's Sputnik moment".
It also amplified calls for Washington to get even tougher on restricting Chinese firms from getting hold of high-tech chips.
In his interview with Waves, Liang acknowledged that the toughest obstacle has been those US curbs.
"Money has never been the problem we face; it's the embargo on high-end chips," he said.
But beyond the geopolitics, the "geeky" AI guru said he hoped the technology could help us understand deeper things about the human mind.
"We hypothesize that the essence of human intelligence might be language, and human thought could essentially be a linguistic process," he said.
"What you think of as 'thinking' might actually be your brain weaving language."
DeepSeek: Chinese AI firm sending shock waves through US tech
Beijing (AFP) Jan 27, 2025 -
Chinese firm DeepSeek's artificial intelligence chatbot has soared to the top of the Apple Store's download charts, stunning industry insiders and analysts with its ability to match its US competitors.
The programme has shaken up the tech industry and hit US titans including Nvidia, the AI chip juggernaut that saw nearly $600 billion of its market value erased, the most ever for one day on Wall Street.
Here's what you need to know about DeepSeek:
- Top performer -
DeepSeek was developed by a start-up based in the eastern Chinese city of Hangzhou, known for its high density of tech firms.
Available as an app or on desktop, DeepSeek can do many of the things that its Western competitors can do -- write song lyrics, help work on a personal development plan, or even write a recipe for dinner based on what's in the fridge.
It can communicate in multiple languages, though it told AFP that it was strongest in English and Chinese.
It is subject to many of the limitations seen in other Chinese-made chatbots like Baidu's Ernie Bot -- asked about leader Xi Jinping or Beijing's policies in the western region of Xinjiang, it implored AFP to "talk about something else".
But from writing complex code to solving difficult sums, industry insiders have been astonished by just how well DeepSeek's abilities match the competition.
"What we've found is that DeepSeek... is the top performing, or roughly on par with the best American models," Alexandr Wang, CEO of Scale AI, told CNBC.
That's all the more surprising given what is known about how it was made.
In a paper detailing its development, the firm said the model was trained using only a fraction of the chips used by its Western competitors.
- 'Sputnik moment'? -
Analysts had long thought that the United States' critical advantage over China when it comes to producing high-powered chips -- and its ability to prevent the Asian power from accessing the technology -- would give it the edge in the AI race.
But DeepSeek researchers said they spent only $5.6 million developing the latest iteration of their model -- peanuts when compared with the billions US tech giants have poured into AI.
Shares in major tech firms in the United States and Japan have tumbled as the industry takes stock of the challenge from DeepSeek.
Chip making giant Nvidia -- the world's dominant supplier of AI hardware and software -- closed down seventeen percent on Wall Street on Monday.
And Japanese firm SoftBank, a key investor in US President Donald Trump's announcement of a new $500 billion venture to build infrastructure for artificial intelligence in the United States, lost more than eight percent.
Venture capitalist Marc Andreessen, a close advisor to Trump, described it as "AI's Sputnik moment" -- a reference to the Soviet satellite launch that sparked the Cold War space race.
"DeepSeek R1 is one of the most amazing and impressive breakthroughs I've ever seen," he wrote on X.
- Open source model -
Like its Western competitors Chat-GPT, Meta's Llama and Claude, DeepSeek uses a large-language model -- massive quantities of texts to train its everyday language use.
But unlike Silicon Valley rivals, which have developed proprietary LLMs, DeepSeek is open source, meaning anyone can access the app's code, see how it works and modify it themselves.
"We are living in a timeline where a non-US company is keeping the original mission of OpenAI alive -- truly open, frontier research that empowers all," Jim Fan, a senior research manager at Nvidia, wrote on X.
DeepSeek said it "tops the leaderboard among open-source models" -- and "rivals the most advanced closed-source models globally".
Scale AI's Wang wrote on X that "DeepSeek is a wake up call for America".
- 'Great things' -
Beijing's leadership has vowed to be the world leader in AI technology by 2030 and is projected to spend tens of billions in support for the industry over the next few years.
And the success of DeepSeek suggests that Chinese firms may have begun leaping the hurdles placed in their way.
Last week DeepSeek's founder, hedge fund manager Liang Wenfeng, sat alongside other entrepreneurs at a symposium with Chinese Premier Li Qiang -- highlighting the firm's rapid rise.
Its viral success also sent it to the top of the trending topics on China's X-like Weibo website Monday, with related hashtags pulling in tens of millions of views.
"This really is an example of spending a little money to do great things," one user wrote.
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