What is DeepSeek-R1, which spooked global AI market?

Jan 27, 2025 06:43 PM IST

DeepSeek-R1’s launch caused a significant decline in technology shares shaking investors’ confidence in the AI sector’s strong demand for high-tech chips

DeepSeek AI, a Chinese tech startup last week released its open-source AI model, DeepSeek-R1, which soon became the centre of attraction in the global market.

DeepSeek-R1, use multi-stage training and large-scale reinforcement learning (RL) techniques.( Lam Yik/Bloomberg)

Its launch caused a significant decline in technology shares worldwide during the pre-market trading and reportedly shook investors’ confidence in the AI sector’s strong demand for high-tech chips.

While Nasdaq futures fell over 3%, S&P 500 futures tumbled nearly 2%.

Dominant AI chipmaker Nvidia’s 8.4% slide led declines among heavyweight mega-cap stocks in premarket trading, with Microsoft off by 4%, Meta Platforms down 3.7% and Alphabet shedding 3.1%.

Also Read | DeepSeek reworks economics of AI, but is one more censorship happy Chinese firm

Such is believed to be the impact of DeepSeek AI, which has rolled out a free assistant it says uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centres.

What is DeepSeek AI’s DeepSeek-R1: All you need to know

Fire-Flyer, a deep-learning division of High-Flyer, a Chinese quantitative hedge fund, gave rise to DeepSeek, an AI research lab.
Last week, DeepSeek AI made headlines throughout the world when its open-source AI model, DeepSeek-R1, was released.
An improved reasoning model called DeepSeek-R1 asserts that it outperforms current standards on several crucial tasks.
To accomplish these capabilities, the model and its variations, like DeepSeek-R1, use multi-stage training and large-scale reinforcement learning (RL) techniques.
High-Flyer, which was founded in 2015, rose to fame by using cutting-edge computing to analyze financial data. Liang Wenfeng, the company’s founder, shifted efforts to DeepSeek by 2023 intending to produce ground-breaking AI models.
Given the limitations imposed by the continuing tech battle between the US and China, DeepSeek’s achievement is especially remarkable.
Like all other Chinese-made AI models, DeepSeek self-censors on topics deemed politically sensitive in China.
Unlike ChatGPT, DeepSeek deflects questions about Tiananmen Square, President Xi Jinping or the possibility of China invading Taiwan.
The exact cost of development and energy consumption of DeepSeek are not fully documented, but the startup has presented figures that suggest its cost was only a fraction of OpenAI’s latest models.

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