Tue Jan 28 13:10:00 IST 2025: ## DeepSeek’s Low-Cost AI Model Sparks Controversy and Market Turmoil

**San Francisco, CA –** The rapid rise and subsequent controversy surrounding DeepSeek, a Chinese AI startup, has sent shockwaves through the US tech industry, causing a significant drop in the value of major tech companies like Nvidia. DeepSeek claims to have developed its highly competitive AI models, V3 and R3, in just two months at a cost of under $6 million USD, utilizing the less powerful Nvidia H800 GPUs—a chip designed to comply with US export restrictions.

The company’s announcement has been met with skepticism from high-profile figures in the AI world. Alexandr Wang, CEO of Scale AI, suggested DeepSeek may be utilizing far more advanced hardware, potentially including 50,000 Nvidia H100 chips, a claim seemingly corroborated by Elon Musk. These statements allege DeepSeek’s reported low cost is misleading and possibly a result of leveraging existing research and resources beyond the $6 million figure. Gavin Baker, CIO of Atreides Management, further reinforced this skepticism, citing a previous DeepSeek report referencing a cluster of 100,000 A100 chips, raising concerns about potential circumvention of US export controls.

Despite these accusations, DeepSeek’s V3 model briefly became the top downloaded app on the US App Store, surpassing ChatGPT in popularity. This success, coupled with the claimed low development cost, triggered a market sell-off, wiping out nearly $600 billion from Nvidia’s market capitalization on January 27th. The dramatic market reaction has prompted responses from major tech players like Microsoft, Meta, and Nvidia itself, highlighting the significant impact of DeepSeek’s disruptive technology. Mark Zuckerberg reportedly assembled a team to investigate DeepSeek’s models. While some believe the market is overreacting and that US companies could replicate DeepSeek’s model if they chose, the controversy underscores the rapidly evolving landscape of the AI industry and the intense competition between US and Chinese tech companies. DeepSeek’s success also follows a trend of Chinese apps gaining popularity in the US market, further complicating the geopolitical and technological dynamics at play.

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