DeepSeek has set the artificial intelligence industry alight with its rapid growth and ability to match the skills of its Western competitors at what appears to be a fraction of the cost incurred by US-based tech giants.
But its meteoric ascent has raised questions about how a start-up could have become a market leader so rapidly, apparently side-stepping a US ban on Chinese firms using the most advanced microchips available to domestic tech companies.
The Chinese firm claims it took just two months and cost under $6 million to build an AI model using Nvidia’s less-advanced chips, and launched its iPhone app in the US last week.
The chatbot has since become the most downloaded free app in the country – with its skyrocketing popularity seeing the value of its rival AI firms tumble and sending shockwaves through Wall Street and Silicon Valley.
China hawks have labelled it ‘Communist AI’, with a major concern among Western officials being that the chatbot feeds users Chinese propaganda and disinformation. This includes on Taiwan, a potential flashpoint for future world wars, which it declares ‘an inalienable part of China’.
DeepSeek’s CEO and founder Liang Wenfeng has been held up as a national hero in China due to his defiance of American attempts to limit the country’s high-tech ambitions with the microchip ban.
On the day his app was launched in the US, Liang met with China’s prime minister Li Qiang at a gathering of business leaders to share his insights on the AI sector, according to state media.
China’s track record of utilising ostensibly private firms for spying, combined with the rapid rate US citizens have been downloading DeepSeek, has fuelled fears about Beijing’s ability to use China-based firms to access peoples’ private information.
The company will be able to collect information on users’ devices, typing patterns, IP address and more, experts have warned, and would have to hand this over to the Chinese government if instructed to do so.
Experts have now suggested that the company could have had Beijing’s help in sourcing powerful chips as part of the Chinese government’s drive to get ahead in its battle with the West for technological supremacy and harvest information on its enemies.
Luke de Pulford, director of the Inter-Parliamentary Alliance on China, told that the UK and US governments should be worried about the power that could give DeepSeek – and by extension the Chinese government.
‘As with TikTok, DeepSeek has the ability to collect masses of sensitive data, all of which is vulnerable to state interference,’ he said.
‘Aside from violations of data protection, this hands the Communist Party a strategic advantage – they can crunch and analyse intimate information on hundreds of millions of foreign nationals.’
He added that under the Chinese Communist Party’s doctrine of Military-Civil Fusion ‘the line between the private sector and state is increasingly blurred.’
Kayla Blomquist, a researcher at the Oxford Internet Institute and director of the Oxford China Policy Lab, agreed that the collection of people’s data on a mass scale is a possibility.
‘It’s very difficult, if not impossible, to know for sure that there are not backdoors built into a system, that there are not other methods of data exfiltration back to mainland China for strategic purposes on the government’s behalf,’ Blomquist told the BBC.
Shadow Security Minister Alicia Kearns said of DeepSeek: ‘There’s no such thing as low cost, because the security and privacy costs are extremely high – let alone the perverted prism through which many answers will be presented.
‘AI may be the space race of our time, but this time every member of our community has a role to play.
‘If your data is going into the hands of the Chinese Communist Party, you’re helping them on this race as they suck every bit of detail about you that they can – even your keystrokes.’
Previously at the helm of one of China’s top hedge funds, High-Flyer, which focuses on AI-driven quantitative trading, the ‘nerdy’ Liang reportedly told colleagues of his plans to talking about build a 10,000-chip cluster to train his own models.
By 2022, his fund amassed a cluster of 10,000 of California-based Nvidia’s high-performance A100 processor chips that are used to build and run AI systems, according to a post that summer on Chinese social media platform WeChat.
It was around this time that Biden administration officials finally woke up to the risks that selling the most powerful microchips to China could pose.
Officials announced that they would ban the export of Nvidia’s chips to the country, saying they needed to do so in order limit the spread of technology that could be used to make weapons.
Despite the ban, DeepSeek set up in 2023. The company now claims to have developed its open-source R1 model using around 2,000 Nvidia chips, just a fraction of the computing power generally thought necessary to train similar programmes.
DeepSeek has said its recent models were built with Nvidia’s lower-performing H800 chips, which are not banned in China, sending a message that the fanciest hardware might not be needed for cutting-edge AI research.
Trump has since signed an order on his first day in office last week that said his administration would ‘identify and eliminate loopholes in existing export controls,’ signaling that he is likely to continue and the harden Biden administration’s approach.
Speaking Monday, Trump called the development ‘positive’ if true because ‘you won’t be spending as much and you’ll get the same result.’ He called the development a ‘wakeup call for our industries that we need to be laser focused on competing to win.’
Lennart Heim, a researcher at Rand Corp, said that ‘it’s the first time that we see a Chinese company being that close within a relatively short time period. I think that´s why a lot of people pay attention to it.’
The attention on DeepSeek also threatens to undermine a key strategy of US foreign policy in recent years to restrict the sale of American-designed AI semiconductors to China. Some experts on US-China relations don’t think that is an accident.
‘The technology innovation is real, but the timing of the release is political in nature,’ said Gregory Allen, director of the Wadhwani AI Center at the Center for Strategic and International Studies
He added that with it, the Chinese are ‘trying to show that the export controls are futile or counterproductive is a really important goal of Chinese foreign policy right now.’
Another major concern about the growing popularity of DeepSeek is the information that it provides users with, which is heavily censored under Chinese law.
The chatbot says it is ‘programmed’ to provide answers that toe the Chinese government line, for example refusing to answer questions about Beijing’s crackdown on the 1989 Tiananmen Square protests and declaring that ‘Taiwan is an inalienable part of China’.
Leading Tory China hawk Bob Seely, a former member of Parliament’s Foreign Affairs Select Committee, said: ‘It is quite clear there is a battle for dominance in AI, the consequences of which will be profound for the world. China is clearly playing catch-up.
‘Its AI is also seeking to influence minds because it has been programmed not to provide answers or process topics that China’s Communist Party doesn’t want raised. Communist AI will, I suspect, be an increasing threat to freedom.’
What is DeepSeek?
DeepSeek in a Chinese start-up that develops open-source AI models, meaning the developer community can inspect and improve the software.
The company unveiled its first AI model in November 2023, followed by DeepSeek-V2 in May 2024 and DeepSeek-V3 in December 2024.
Then, on January 20, 2025, DeepSeek-R1 was released, which topped the Apple Store’s most popular free apps list as of January 27.
DeepSeek’s latest AI Assistant is said to perform comparably with OpenAI’s most recent ChatGPT release.
However, the cost of training and developing DeepSeek’s models appears to be only a fraction of what is required for its Western rivals.
DeepSeek says V3 used Nvidia’s H800 chips for training, which are not top-of-the-line – and only 2000 of them, compared with the tens of thousands that are normally used for training models of a similar size.
This is said to have cost just $6million, compared to $100million+ that US firms have funnelled into their models.
The app also distinguishes itself from other chatbots by articulating its reasoning before delivering a response to a prompt.
Who founded DeepSeek and why?
Deepseek was founded in May 2023 by Liang Wenfeng, the founder and chief of AI-driven quantitative hedge-fund High-Flyer.
DeepSeek operates independently, but is solely funded by High-Flyer.
This funding models allows DeepSeek to pursue ambitious projects without the pressure of external investors, meaning they can more easily invest in long-term research and development.
The team comprises of mostly young, talented graduates from top Chinese universities, fostering a culture of innovation and deep understanding of the Chinese language and culture.
Their hiring practices prioritise technical abilities over traditional work experience, resulting in a workforce that is highly skilled and bring new perspectives on AI.
Why is DeepSeek such a threat to US big tech firms?
The emergence of DeepSeek’s viable, cheaper AI alternative may mark a turning point in the level of spending and investment needed for AI.
Marc Andreessen, the Silicon Valley venture capitalist, said that DeepSeek’s R1 model was AI’s ‘Sputnik moment’, referencing the former Soviet Union’s launch of a satellite that marked the start of the space race in the late 1950s.
In a separate post, he said: ‘Deepseek R1 is one of the most amazing and impressive breakthroughs I´ve ever seen – and as open source, a profound gift to the world.’
DeepSeek has upended widely held views about US primary in AI and the effectiveness of Washington’s export controls targeting China’s advanced chip and AI capabilities.
Firms like OpenAI, Meta, Google, Apple, and Microsoft will now have to face up to this new competitor.