On Monday, Chinese AI startup DeepSeek announced it was limiting the registration of new users following large-scale cyberattacks on its services. The attacks temporarily disrupted access for prospective users while existing accounts remained functional. The news followed the chatbot’s meteoric rise to the top of Apple’s App Store, surpassing OpenAI’s ChatGPT as the most downloaded app in the United States.
DeepSeek revealed the attacks through its status page, stating the incident involved “large-scale malicious activity” that necessitated two hours of monitoring and mitigation. By Tuesday, the platform resumed normal operations, allowing new registrations.
Rivaling AI Titans at a Fraction of the Cost
DeepSeek, based in Hangzhou, China, has shaken the AI landscape with its generative AI model, DeepSeek-R1, designed to rival top models from Silicon Valley’s OpenAI and Google. Remarkably, the company developed this model with an estimated $6 million budget—far less than the billions invested by U.S. competitors.
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Using less advanced Nvidia chips, DeepSeek developed an AI model that performs on par with its Western rivals. This achievement raised concerns among U.S. tech leaders and policymakers about the effectiveness of export restrictions on high-end chips aimed at curbing China’s progress in AI.
Economic Ripples and “Sputnik Moment” Comparisons
The sudden success of DeepSeek sent shockwaves through global markets. On Monday, Nvidia, a leading supplier of AI chips, saw its stock plunge by 13.6%, wiping out $500 billion in market value. Similarly, Alphabet and Microsoft experienced significant losses, while Apple and Amazon remained steady.
Venture capitalist Marc Andreessen described DeepSeek’s achievement as AI’s “Sputnik moment,” echoing the 1957 launch of the Soviet satellite that spurred the U.S. to accelerate its space program. This comparison underscores fears that China may be closing the AI gap with the U.S.
Navigating U.S.-China AI Competition
DeepSeek’s emergence reignited debates about AI leadership. Analysts previously believed that U.S. dominance in high-end chips would ensure its edge in AI development. However, DeepSeek’s innovative approach of optimizing slower chips has challenged this assumption.
In response, U.S. President Donald Trump highlighted the need for a stronger focus on AI competitiveness, announcing a $500 billion initiative, Stargate, involving OpenAI, Oracle, and SoftBank. Trump characterized DeepSeek’s rise as a wake-up call for American companies.
A New AI Frontier
DeepSeek’s rapid ascent has sparked intellectual and economic curiosity. While its open-access policy has democratized high-performing AI capabilities, experts warn that the field’s rapid pace could soon render its achievements commonplace.
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Sam Altman, CEO of OpenAI, acknowledged DeepSeek’s innovation but emphasized the importance of computational power in advancing AI research. Others noted that OpenAI’s best-performing models are often paywalled, skewing public perception of its capabilities compared to DeepSeek’s freely available tools.