What is DeepSeek? China's AI app rivals U.S.-based tech companies

For the second time in the last month, a Chinese app has skyrocketed to the top spot in Apple’s App Store.

The first was Xiaohongshu, or RedNote, which saw a sudden surge in downloads by United States users seeking an alternative to TikTok in anticipation of the ban on that app, which had been scheduled to take effect on Jan. 19.

Now it’s DeepSeek, a Chinese artificial intelligence company that released a new chatbot model called R1 on Jan. 20. The DeepSeek app has since climbed to the top of the Apple App charts, recording more than 1.6 million downloads since it launched on Jan. 10, according to the market tracker App Figures.

DeepSeek announced Monday that it is temporarily restricting new users from signing up for its services, citing “large-scale malicious attacks.” But prior to that, the Chinese startup and its new chatbot seemed on track to surpass the popularity of U.S.-based AI companies such as OpenAI’s ChatGPT, Meta’s Llama and Google’s Gemini.

But DeepSeek's success in the U.S. has raised some questions. David Sacks, Trump’s AI and crypto czar, said in a Fox News interview on Tuesday that there’s “substantial evidence” that DeepSeek “distilled” knowledge from OpenAI’s AI models.

Sacks did not elaborate on what kind of evidence he was referring to, but multiple news outlets reported later that day that Microsoft, OpenAI's largest investor, was investigating whether DeepSeek obtained OpenAI data in an unauthorized way to build R1. According to OpenAI's Terms of Use, users are not allowed to use OpenAI to build a separate, competitive AI model.

At a House Republican retreat in Miami on Monday, Trump called the initial success of DeepSeek’s R1 model “very much a positive development” because “instead of spending billions and billions, you’ll spend less, and you’ll come up with, hopefully, the same solution.” He then added it should also be seen as a “wake-up call” for U.S.-based tech companies to develop “a faster method of AI, and much less expensive method.”

Here’s what to know.

What is DeepSeek?

DeepSeek was founded in May 2023, by leaders at the Chinese hedge fund, High-Flyer. The company launched its first AI model chatbot, R1, on Jan. 20.

In posts on X, fans of R1 have praised the chatbot’s responses as “human-like” and quick, praising the fact that the app is available for free and that users need not have coding experience to understand how to operate it.

What’s unique about DeepSeek’s R1?

In addition to its sudden popularity on the App Store, DeepSeek has attracted attention for its relatively small staff and budget, as compared with the sums American companies have spent on AI development. According to a report in the Wall Street Journal over the weekend, DeepSeek launched R1 with a team of less than 200 people and only spent $5.6 million to train its AI models.

By comparison, last week, Meta CEO Mark Zuckerberg said his social media conglomerate would invest between $60 billion and $65 billion in AI development this year. In 2024, Sam Altman, the CEO of OpenAI, said the tech industry would need to spend “trillions” on the computer chips used to power AI.

Altman called DeepSeek’s R1 “an impressive model” especially “for the price” in a post on X. “We will obviously deliver much better models and also it’s legit invigorating to have a new competitor!” he wrote.

Like other Chinese platforms, there are signs of censorship on DeepSeek on certain topics that are considered sensitive in China, such as questions about the 1989 Tiananmen Square protests or China's President Xi Jinping.

How is DeepSeek impacting the U.S. stock market?

DeepSeek’s success appears to challenge the idea that the U.S. has control of the AI industry. Concerns about this potential threat to U.S. dominance in the field seemed to be reflected on Wall Street Monday, with stocks falling for massive tech giants like Nvidia, Meta and Google’s parent company, Alphabet.

In particular, the company’s claim that it built its AI model at a much lower cost compared to other, similar AI platforms seems to be causing panic in the stock market.

Yahoo Finance reported that Nvidia, one of the most valuable tech companies in the world, and which builds computer chips for AI, lost a record $589 billion in market capitalization yesterday. The net worth of Nvidia’s CEO and biggest shareholder, Jensen Huang, fell $20.8 billion.

Read more about the stock market reaction from Yahoo Finance: AI-exposed power stocks get crushed as fears about DeepSeek trigger stock market sell-off

Is China seen as a threat to American AI?

In the past, Washington has banned exporting higher-end technologies to China in hopes of stalling China’s advances in AI. A week before leaving office, Biden’s administration proposed a new framework for restricting U.S. exports of AI computer chips, to prevent countries like China from accessing the advanced technology.

“If it’s China and not the United States determining the future of AI on the planet, I think that the stakes of that are just profound," former White House national security adviser Jake Sullivan said at the time.

At the House Republican retreat this week, Trump said he hoped DeepSeek’s success would remind U.S. tech companies that “we need to be laser-focused on competing.”

Trump has signed an executive order on AI to repeal any government policies that “act as barriers to American AI innovation” and, on Jan. 21, announced that his administration was closely working with the Oracle Corporation, OpenAI and SoftBank on his $500 billion AI venture, “Stargate.”

At her first press briefing on Tuesday, White House Press Secretary Karoline Leavitt said that the National Security Council is "looking into" any potential security concerns related to DeepSeek.

Leavitt said that while Trump feels confident that "we'll restore American dominance" in the AI field, DeepSeek's success is because the Biden administration "sat on its hands and allowed China to rapidly develop this AI program." (DeepSeek had obtained some of its advanced chips for AI programming before former President Joe Biden's executive order restricting AI chip exports to Chinese tech companies went into effect.)