Chinese app DeepSeek hammers US tech stocks with cheaper open-source AI model

Chinese AI startup DeepSeek is gaining attention in Silicon Valley as the company appears to be nearly matching the capability of chatbots like OpenAI’s ChatGPT, but at a fraction of the development cost.

DeepSeek has surged in popularity in global app stores since the app was released earlier this month, having been downloaded1.6 million times by Jan. 25 in the U.S. and ranking No. 1 in iPhone app stores in Australia, Canada, China, Singapore, the U.S. and the U.K. Unlike ChatGPT and other major AI competitors, DeepSeek is open-source, allowing developers to offer their own improvements on the software.

The company unveiled R1, a specialized model designed for complex problem-solving, on Jan. 20, which “zoomed to the global top 10 in performance,” and was built far more rapidly, with fewer, less powerful AI chips, at a much lower cost than other U.S. models, according to the Wall Street Journal.

Meta’s Chief AI scientist, Yann LeCun, took to social media to speak about the app and its rapid success.

AI WILL BE THE MAJOR FOCUS AT LAS VEGAS CONSUMER ELECTRONICS SHOW

He pointed out in a post on Threads, that what stuck out to him most about DeepSeek’s success was not the heightened threat created by Chinese competition, but the value of keeping AI models open source, so anyone could benefit. 

“It’s not that China’s AI is ‘surpassing the US,’ but rather that ‘open source models are surpassing proprietary ones,’” LeCun explained.

OPENAI CEO SAM ALTMAN RINGS IN 2025 WITH CRYPTIC, CONCERNING TWEET ABOUT AI’S FUTURE

The new potential of open source AI development caused waves in the stock market, causing some traders to sell off shares in companies like Nvidia, which develops the computer chips typically necessary for brute-force AI training.

Experts told the Journal that DeepSeek’s technology is still behind OpenAI and Google. However, it is a close rival despite using fewer and less-advanced chips, and in some cases skipping steps that U.S. developers consider essential.

As of Saturday, the Journal reported that the two models of DeepSeek were ranked in the top 10 on Chatbot Arena, a platform hosted by University of California, Berkeley researchers that rates chatbot performance.

While DeepSeek’s flagship model is free, the Journal reported that the company charges users who connect their own applications to DeepSeek’s model and computing infrastructure.

Fox Business’ Stepheny Price contributed to this report