DeepSeek

DeepSeek’s superior efficiency, affordability, and transparency compared to American AI companies led to a sharp decline in U.S. tech stocks on January 27. NVIDIA Corporation (NVDA) was particularly affected, with its share price plummeting 17% and losing nearly $600 billion in market capitalization—the largest one-day loss for a single company in U.S. stock market history. Many observers referred to the release of DeepSeek as a “Sputnik moment” that undermined widely held assumptions about American technological primacy.

DeepSeek-R1 is estimated to be 95% cheaper than OpenAI’s ChatGPT-o1 model and requires a tenth of the computing power of Llama 3.1 from Meta Platforms’ (META). Its efficiency was achieved through algorithmic innovations that optimize computing power, rather than U.S. companies’ approach of relying on massive data input and computational resources. DeepSeek further disrupted industry norms by adopting an open-source model, making it free to use, and publishing a comprehensive methodology report—rejecting the proprietary “black box” secrecy dominant among U.S. competitors.

Anticipating the growing importance of AI, Liang began accumulating NVIDIA graphics processing units (GPUs) in 2021, before the U.S. government placed restrictions on chip sales to China. This foresight enabled him to collect about 10,000 NVIDIA A100 GPUs, laying the groundwork for future AI endeavors.

In April 2023, High-Flyer announced the establishment of an artificial general intelligence lab dedicated to developing AI tools separate from its financial operations. By July 2023, this lab was incorporated as DeepSeek, with High-Flyer as its primary investor. Initially, venture capital firms were hesitant to fund DeepSeek because of uncertainties about its short-term profitability.

DeepSeek’s first breakthrough occurred in May 2024 with the release of the chatbot model DeepSeek-V2. This model gained immense popularity in China for its cost-efficiency, outperforming offerings from major tech companies such as ByteDance, Tencent, Baidu, and Alibaba. The success of DeepSeek-V2 triggered a price war, compelling each of these competitors to significantly cut prices on their AI models.

Building on this momentum, DeepSeek released DeepSeek-V3 in December 2024, followed by the DeepSeek-R1 reasoning model and its chatbot application in January 2025. These developments marked DeepSeek’s entry into the international market, challenging the prevailing assumption of U.S. dominance in AI. Shortly thereafter, Liang Wenfeng participated in a symposium with Chinese Premier Li Qiang, highlighting the government’s support for DeepSeek’s initiatives.

Unlike other Chinese technology companies, which are widely known for their “996” work culture (9 a.m. to 9 p.m., six days a week) and hierarchical structures, DeepSeek fosters a meritocratic environment. The company prioritizes technical competence over extensive work experience, often recruiting recent college graduates and individuals from diverse academic backgrounds. This approach emphasizes creativity, passion, and collaboration, drawing inspiration from Western work cultures.

On January 30, Italy’s data protection authority, the Garante, blocked DeepSeek throughout the country, citing the company’s failure to provide adequate responses regarding its data privacy practices. On February 4, Australia banned DeepSeek from all government devices, with Home Affairs Minister Tony Burke emphasizing the security risks associated with foreign AI platforms.

Coinciding with increased scrutiny and regulatory actions, DeepSeek was targeted by a large-scale cyberattack, leading the company to suspend new user registrations outside mainland China on January 29.

The attack, which DeepSeek described as an “unprecedented surge of malicious activity,” exposed multiple vulnerabilities in the model, including a widely shared “jailbreak” exploit that allowed users to bypass safety restrictions and access system prompts. Further, a data breach led to the online leak of more than 1 million sensitive records, including internal developer notes and anonymized user interactions. The incident underscored both the security challenges facing AI platforms and the increasingly adversarial nature of the global race to dominate AI development.