Budget AI Model DeepSeek Overtakes ChatGPT on App Store

A new China-based AI chatbot challenger called DeepSeek has reached the number one position on Apple's App Store free charts in multiple countries, including the US, raising questions about Silicon Valley's perceived leadership in artificial intelligence development.

Released last week, the iOS app has garnered attention for its ability to match or exceed the performance of leading AI models like ChatGPT, while requiring only a fraction of the development costs, based on a research paper released on Monday.

DeepSeek has not raised money from outside funds or made significant moves to monetize its R1 model, which the company claims is on par with GPT-4o and Anthropic's Claude 3.5 Sonnet. The Chinese AI startup behind the model was founded by hedge fund manager Liang Wenfeng, who claims they used just 2,048 Nvidia H800s and $5.6 million to train R1 with 671 billion parameters, a fraction of what OpenAI and Google spent to train comparably sized models. For example, Microsoft and Meta alone have committed over $65 billion each this year largely to AI infrastructure. Just last week, OpenAI said it was creating a joint venture with Japan's SoftBank, dubbed Stargate, with plans to spend at least $100 billion on AI infrastructure in the US.

Investor Marc Andreessen is already calling DeepSeek "one of the most amazing and impressive breakthroughs" for its ability to show its work and reasoning as it addresses a user's written query or prompt. DeepSeek has also taken an open-source approach, allowing developers to freely inspect and build upon its technology.

What's particularly notable is that DeepSeek apparently achieved this breakthrough despite US export restrictions on advanced AI chips to China. The company's success suggests Chinese developers have found ways to create more efficient AI models with limited computing resources, potentially challenging the assumption that cutting-edge AI development requires massive computing infrastructure investments.

The emergence of DeepSeek has already sparked debate in Silicon Valley. While some view it as a concerning development for US technological leadership, others, like Y Combinator CEO Garry Tan, suggest it could benefit the entire AI industry by making model training more accessible and accelerating real-world AI applications.

The app's success has already impacted financial markets, with some AI-related stocks experiencing volatility as investors reconsider the necessity of extensive capital expenditure for AI development. Shares of Nvidia for example slid 10% in premarket trading on Monday on the news of DeepSeek's popularity.