Chinese answer to ChatGPT: how DeepSeek is changing AI market

​The stock and cryptocurrency markets are experiencing turbulence due to the emergence of DeepSeek. The Chinese alternative to ChatGPT has proven so successful that the entire AI sector is urgently rethinking its approaches to development and implementation.

Last week, DeepSeek introduced its new product — the R1 AI model. This free version of artificial intelligence demonstrated performance comparable to expensive competitors on the market. The news caused a strong reaction in financial markets, as investors realized that creating successful AI solutions does not require multi-million-dollar investments in hardware. As a result, the stock price of Nvidia, a leading graphics processor manufacturer, plummeted.

Decline in Nvidia’s stock. Source: TradingView

Now let’s take a closer look at what makes DeepSeek unique and what the market should prepare for."

What is DeepSeek?

DeepSeek is a Chinese AI startup founded in 2023 by Liang Wenfeng. It gained global attention after releasing its AI model designed to mimic human reasoning. The product stood out for its unique approach, offering performance comparable to leading AI systems like OpenAI's ChatGPT. 

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According to data from App Figures, DeepSeek mobile app topped the App Store charts and has been downloaded more than 1.6 million times to date. But what exactly makes DeepSeek unique?

How does DeepSeek differ from ChatGPT?

The success of the project is primarily attributed to its ability to create powerful AI models without relying on expensive hardware, which companies like Nvidia and Meta heavily depend on. Developing the initial version of its AI system cost DeepSeek around $6 million—95% less than the expenses incurred by OpenAI for ChatGPT. Even OpenAI CEO Sam Altman called DeepSeek R1 “impressive.”

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Unlike the closed system of ChatGPT, DeepSeek employs open-source code, allowing developers worldwide to study and improve the software. Additionally, DeepSeek differentiates itself with its ability to explain its reasoning process before delivering an answer, making interactions with the model closer to human thinking.

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However, the platform has its limitations—it avoids discussing certain sensitive topics related to China. For example, the model rejects queries about the 1989 Tiananmen Square protests or questions about the potential invasion of Taiwan. It also refuses to discuss the Chinese government, including President Xi Jinping. Despite these constraints, DeepSeek has become a high-quality AI model that has significantly impacted not only Nvidia's stock price but also the cryptocurrency industry.

DeepSeek’s impact on the cryptocurrency sector

The arrival of DeepSeek has led to ripple effects not only in the tech sector but also in the cryptocurrency industry. Following Nvidia’s stock drop, shares of mining companies like Cipher Mining, Core Scientific, and Terawulf fell by 30%. Other companies, such as Hut 8, IREN, and Bitdeer, experienced declines of 20-25%.

This downturn can be attributed to the diversification of mining companies, which have recently ventured into providing infrastructure for AI, alongside Bitcoin mining. The emergence of an affordable product like DeepSeek has devalued their operations.

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Even Coinbase, the cryptocurrency exchange, saw its stock drop by 10%, while MicroStrategy, the largest corporate Bitcoin holder, lost around 8.5%. Against this backdrop, Bitcoin's price briefly fell below $100,000, accompanied by the liquidation of trades worth over $850 million.

New challenges for the U.S.

The emergence of DeepSeek serves as a wake-up call for the United States, signaling the end of its dominance in the AI field. Despite American sanctions aimed at restricting China’s access to advanced technologies, the country has begun producing globally competitive products.

DeepSeek has proven to be a breakthrough, demonstrating that AI can be both efficient and affordable. This challenges the necessity of massive investments made by American companies like OpenAI.

U.S. President Donald Trump commented on the situation, calling DeepSeek’s success “a wake-up call” for American tech companies. He emphasized that such competition demands maximum focus on innovation and competitiveness from the U.S. industry.

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Conclusion

The rise of DeepSeek marks a turning point for the technology and financial sectors. This Chinese startup has proven that powerful and efficient AI models can be developed with minimal costs.

DeepSeek’s influence extends far beyond the tech industry, triggering fluctuations in the stock market, a decline in mining company shares, and a temporary drop in Bitcoin’s price. Moreover, its success highlights the need for the U.S. to reevaluate its AI strategy, as American companies face real global competition.

This case underscores that in the age of innovation, resources alone are not enough—efficiency and strategic approaches play a greater role. President Donald Trump’s remarks about DeepSeek being “a wake-up call” clearly outline the challenge the U.S. is facing. Ahead lies a battle for AI leadership, which will require greater flexibility, speed of adaptation, and readiness to confront new challenges from the American industry.