Trump Calls DeepSeek a 'Wake-Up Call' for US Tech Companies

US President Donald Trump has dubbed the success of Chinese startup DeepSeek "a wake-up call" for the US IT industry following the release of its artificial intelligence (AI) model, which sent shockwaves across Wall Street.

Shares in key technology companies such as Nvidia plunged substantially, with the chip manufacturer shedding about $600 billion (£482 billion) in market value.

DeepSeek's assertion that its R1 model was developed at a fraction of the expense of its competitors has shaken the industry, raising concerns about the future of America's AI dominance and the magnitude of investments that US corporations are planning.

DeepSeek has become the most downloaded free app in the United States just one week after its release.

On Monday, Trump responded to the news by saying that recent improvements in China's AI technology could be "a positive" for the US.

"If you could do it cheaper, for less, and still achieve the same effect. "I believe that's a good thing for us," he told reporters aboard Air Force One.

He also expressed little anxiety about the breakthrough, stating that the United States will continue participating vigorously in the sector.

On Tuesday, shares of Japanese AI firms such as Advantest, Softbank, and Tokyo Electron tumbled dramatically, contributing to a 1% drop in the benchmark Nikkei 225.

Several other Asian markets are closed during the Lunar New Year holiday.

Mainland China's financial markets will be closed starting today and reopen on February 5.

Stock markets in Taiwan and South Korea, two major chip production countries, are closed today.

DeepSeek is powered by the open-source DeepSeek-V3 model, which its researchers claim was trained for approximately $6 million (£4.2 million), substantially less than rivals' billions. Other AI experts, however, have contested this assertion.

Its rise coincides with the United States' restrictions on selling advanced chip technology used to fuel AI to China.

To continue their work without consistent supplies of imported advanced chips, Chinese AI developers collaborated and experimented with novel approaches to the technology.

This has resulted in AI models that demand significantly less computational resources than previously.

It also means that they are far cheaper than previously anticipated, potentially disrupting the sector.

"DeepSeek's ability to rival US models despite limited access to advanced hardware demonstrates that software ingenuity and data efficiency can compensate for hardware constraints," says Marina Zhang, an associate professor at the University of Technology Sydney specialising in China's high-tech industries, according to the BBC.

When DeepSeek-R1 was released earlier this month, the business bragged of "performance on par with" one of OpenAI's most recent models when employed for tasks like math, coding, and natural language thinking.

High-profile figures commended DeepSeek's technology, including OpenAI CEO Sam Altman, who termed it "an impressive model, particularly in terms of what they can deliver for the price." However, he noted that OpenAI would "obviously deliver much better models" in the future.

The Chinese company claims that its model can be trained on 2,000 specialist chips instead of an estimated 16,000 for leading models.

However, not everyone is convinced. Some, including tech mogul Elon Musk, have questioned some of DeepSeek's assertions.

He reacted to a post claiming that DeepSeek owns around 50,000 Nvidia chips that have now been barred from shipment to China by replying, "Obviously."

Who is the Founder of DeepSeek?

Liang Wenfeng launched the corporation in 2023 in Hangzhou, a city in southeast China.

The 40-year-old, who graduated in information and electronic engineering, also formed the hedge fund that backed DeepSeek.

He was recently observed attending a conference of industry experts and Chinese Premier Li Qiang.

In a July 2024 interview with The China Academy, Mr Liang expressed surprise at the response to the previous version of his AI program.

"We didn't expect pricing to be such a sensitive issue," he told me.

"We were simply following our pace, calculating costs, and setting prices accordingly."