Here’s what you need to know

On Monday, Chinese artificial intelligence startup Deepseek took rival Openai’s coveted spot as the most downloaded free app in the US on Apple‘s App Store, dethroning chatgpt for Deepseek’s AI assistant. Global tech stocks that sold off were in the process of wiping out billions in market cap.

Tech executives, analysts, investors and developers say the hype—and subsequent fear of falling behind in the ever-changing AI hype cycle—may be justified. Especially in the era of the generative AI arms race, where both tech giants and startups are fighting to ensure they don’t fall behind in a market predicted to top $1 trillion in turnover within a decade.

Buzz around Deepseek started picking up Steam earlier this month when the startup released R1, its reasoning model that competes with Openais O1. It’s open source, which means any AI developer can use it and has rocketed to the top of app stores and industry leaderboardswith users praising its performance and reasoning capabilities.

Like other Chinese chatbots, it has its limitations when asked about certain topics: when asked about some of Chinese leader Xi Jinping’s policies, for example Deepseek steer the user away From similar question marks.

Another important part of the discussion: Deepseek’s R1 was built despite the US Credential chip export to China three times in three years. Estimates differ on exactly how much Deepseeks R1 cost, or how many GPUs went into it. Jefferies analysts estimated that a recent version had a “training cost of just US$5.6 million Meta‘S LLAMA. “However, regardless of the specific numbers, reports agree that the model was developed at a fraction of the cost of rival models by Openai, anthropic, Google and others.

As a result, the AI ​​sector is beset by questions, including whether the industry’s growing number of astronomical funding rounds and billion-dollar valuations are necessary—and whether a bubble is about to burst.

Shares of Nvidia fell 11% with chipmaker ASML down more than 6%. The Nasdaq fell by more than 2% and four tech giants – Meta, Microsoft, Apple And ASML is all set to report earnings this week.

Analysts at Raymond James detailed some of the questions plaguing the AI ​​industry this month, writing: “What are the investment implications? What does this say about open source versus proprietary models? Is throwing money at GPUs really a panacea? Are US export restrictions working you?

Bernstein analysts wrote in a note Monday that “according to the many (occasionally hysterical) hot takes we saw (over the weekend) implications range anywhere from ‘this is really interesting’ to ‘this is the death knell for the AI ​​infrastructure complex that we know it.'”

Some US tech CEOs are scrambling to respond before clients switch to potentially cheaper offerings from Deepseek, with Meta reportedly launching four Deepseek-related “War room“Within its generative AI department.

Microsoft CEO Satya Nadella wrote On X that the deepseek phenomenon was just an example of the Jevons paradox, he wrote, “as AI becomes more efficient and accessible, we’ll see its use skyrocket and make it a commodity we just can’t get enough of. ” Openai CEO Sam Altman tweeted a quote he attributed to Napoleon, writing: “A revolution can neither be made nor stopped. The only thing that can be done is for one of several of its children to give it direction at the Dint of Victories .”

Yann Lecun, Meta’s Chief AI Scientist, wrote On LinkedIn, Deepsek’s success is indicative of changing tides in the AI ​​sector to favor open source technology.

Lecun wrote that Deepseek has taken advantage of some of Meta’s own technology, ie. its llama models, and that startups “brought new ideas and built them on top of other people’s work. Because their work is published and open source, everyone can profit from it.

Alexandr Wang, CEO of Scale AI, told CNBC last week that Deepseek’s last AI model was “ground meat” and that its R1 release is even more powerful.

“What we have found is that Deepseek … is the best performer or about on par with the best American models,” Wang said, adding that the AI ​​race between the US and China is an “AI war.” Wang’s company provides training data to input AI players, including Openai, Google and Meta.

Earlier this week, President Donald Trump announced a joint venture with Openai, Oracle and SoftBank to invest billions of dollars in America’s AI infrastructure. The project, Stargate, was unveiled at the White House by Trump, Softbank CEO Masayoshi Son, Oracle co-founder Larry Ellison and Openai CEO Sam Altman. Key initial technology partners will include Microsoft, Nvidia and Oracle, as well as Semiconductor Company Arm. They said they would invest $100 billion to start and up to $500 billion over the next four years.

News of Deepseek’s prowess also comes amid growing hype around AI agent models that go beyond chatbots to perform multi-step complex tasks for a user—which tech giants and startups are chasing. Meta, Google, Amazon, Microsoft, Openai, and Anthropic have all expressed their goals of building agent AI.

Anthropic, The The Amazon-backed AI startup founded by ex-Openai Research executives ramped up its technology development over the past year, and in October the startup said its AI agents were able to use computers like humans to perform complex tasks. Anthropic’s computing capability allows its technology to interpret what’s on a computer screen, select buttons, enter text, navigate websites and perform tasks through any software and real-time Internet browsing, the startup says.