The rise in popularity of a high-performing and cheaply built Chinese artificial intelligence (AI) model has shaken the confidence of investors, while raising larger questions about the future of American-made AI and upping the stakes of Washington’s tech rivalry with Beijing.

DeepSeek’s new AI model has taken the internet by storm, sparking a significant sell-off in the tech sector as investors fear the billions of dollars U.S. firms have invested into AI infrastructure may be unnecessary.

“It upends the way that investors have thought about how AI needed to be developed and implemented,” said Steve Sosnick, chief strategist at Interactive Brokers, who suggested the industry might be at an “inflection point.”

After launching its latest AI model, R1, last week, DeepSeek surged to the top of Apple’s App Store over the weekend. The application was the No. 1 free app on the store on Monday, while ChatGPT-maker OpenAI sat at the No. 2 spot.

DeepSeek claims its R1 open-source reasoning model has a “performance on par with” OpenAI, which is regarded as one of the U.S.’s leading AI reasoning models.

The company, founded in May 2023, claims to have spent just $5.6 million to train its latest models, The Wall Street Journal first reported.

The price tag pales compared to that incurred by leading U.S. AI firms like OpenAI, Meta and Google, all of which have spent billions of dollars in recent years on AI infrastructure and development of large language models.

A significant chunk of AI developers’ expenses in the U.S. goes to infrastructure, including the data centers and chips used to power the AI training process.

Now, DeepSeek is disrupting the market and showing how AI can be developed at a fraction of the price, while allegedly not relying on the vast data sets, chips and infrastructure thought to be the holy grail of AI development.

“Let’s say the convention wisdom as of yesterday, when you look at the AI market, is that essentially the best models come directly from those who have the deepest and broadest data sets and those that have the most brute force processing power behind them,” said Kenneth Lamont, a senior researcher at Morningstar, a financial services........

© The Hill