But that claim has been disputed by others in the AI space.
The emergence of DeepSeek comes at a time when the US is restricting the sale of advanced chip technology that powers artificial intelligence to China.
To continue their work without a constant supply of imported advanced chips, Chinese AI developers have shared their work with each other and experimented with new approaches to the technology.
This has led to artificial intelligence models that require much less processing power than before. It also means they cost much less than previously thought possible, which could turn the industry around.
After DeepSeek-R1 was launched earlier this month, the company boasted “performance equal to” one of the latest OpenAI models from developer ChatGPT – when used for tasks such as math, coding and natural language reasoning.
Silicon Valley venture capitalist and Donald Trump adviser Marc Andreessen has described DeepSeek-R1 as “AI’s Sputnik moment,” referring to the satellite launched by the Soviet Union in 1957.
At the time, it was believed that the US was caught off guard by the technological advances of its rival.
The popularity of DeepSeek surprised the markets. Shares in ASML, a Dutch chipmaker, fell more than 10%, while Siemens Energy, which makes equipment related to artificial intelligence, fell 21%.
“This idea of a low-cost Chinese version wasn’t necessarily mainstream, so it surprised the market a bit,” said Fiona Cincotta, senior market analyst at City Index.
“So if you suddenly have this low-cost AI model, then it’s going to raise concerns about the bottom line for competitors, especially given the amount they’ve already invested in more expensive AI infrastructure.”
And Singapore-based tech equity adviser Wei-Sern Ling told the BBC it could “potentially derail the investment case for the entire AI supply chain”.
But Wall Street banking giant Citi warned that while DeepSeek could challenge the dominance of US companies such as OpenAI, the challenges faced by Chinese firms could hinder their growth.
“We believe that in an inevitably more restrictive environment, US access to more advanced chips is an advantage,” the analysts said in a report.
Last week, a consortium of American technology companies and foreign investors announced Project Stargate, a company investing $500 billion in AI infrastructure in Texas.
