China's DeepSeek AI rattles tech industry

The tech world was in a downward spiral on Monday over a new Chinese entry into the highly competitive field of artificial intelligence and machine learning by the company DeepSeek.

What is DeepSeak?

What we know:

By using less expensive computing chips, DeepSeek’s new AI system claims to be more economical than its competitors.

As with any technology, those who can do it better and cheaper win a significant portion of the customer base. However, in this case, there are hitches and glitches.

Major microprocessor chipmakers lost ground, with Nvidia falling 17% on Monday, losing almost $590 billion of its market value. The tech-heavy Nasdaq stock exchange lost 612 points, more than 3%, while the S&P 500 lost 1.5%.

It's all due to DeepSeek, a Chinese lab that just launched a computer system capable of performing tasks similar to Western-developed AI systems at a lower cost and on less expensive microchips.

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"Investors and their portfolios woke up this morning walking into a buzzsaw. And the question of the day is: To panic or not to panic," said Gregg Smith, an AI venture capitalist.

Cheaper AI model

Dig deeper:

The market impact was profound.

"They proved, with $5.6 million they can create a chatbot, similar to ChatGPT... compared to the hundreds of millions of dollars to create ChatGPT," said San Jose State Engineering Professor Ahmed Banafa, who is also a PhD in Artificial Intelligence.

Like ChatGPT, CoPilot, and IBM Watson, DeepSeek’s new model is a chatbot that takes research questions and provides answers by applying human-like thought processes—artificial intelligence.

"I think it's too early to know what's gonna happen," said Smith.

Unlike the Chinese-owned platform TikTok, mostly used by people, DeepSeek’s chatbot is likely to be used by companies to improve their operations, protocols, and procedures.

Big picture view:

In order to download the app, users will need to give DeepSeek access to their Gmail accounts.

"The Chinese government will have access to this information and the behavior of the companies asking certain questions. That can be a problem in the future," said Banafa.

Certain topics around China's leaders, history, controversies, and conflicts, are strictly off-limits.

"I asked those questions and one of the answers is, 'Let's talk about something else'. That's not gonna be acceptable. So, this is where you see that it's weak," said Banafa.

While DeepSeek basked in its worldwide attention on Monday, it also had to shut down when hackers successfully attacked it.

The Source: Information for this story comes from an interview with San Jose State University engineering professor Ahmed Banafa and stock exchange data.

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