DeepSeek’s announcement of its low-cost open source AI models at the weekend has shaken up the tech sector in more ways than just competition.
From the outset, the biggest impact of the DeepSeek-R1 launch has been the huge competition it poses to the world’s biggest AI firms, which thus far have been American companies.
OpenAI, Microsoft, Nvidia and Meta have been some of the biggest AI developers for some time with the former particularly notable for its development of ChatGPT. In the days since DeepSeek-R1’s launch, the big tech giants have seen share prices fall.
DeepSeek’s programme is a cheaper alternative to American AI programmes like ChatGPT, and as it is open source its large language model (LLM) codes are free to access, use, view and modify.
With Donald Trump back in the White House, US-China relations are frosty as ever, and in the context of geopolitical competition the new, easily usable Chinese AI model has given the US AI giants a black eye.
“DeepSeek has sent shock waves through the tech industry – directly challenging tech giants like Meta, Microsoft and Open AI,” says Bradford Levy, Assistant Professor of Accounting at the University Of Chicago’s Booth School of Business.
“Until now, it’s been assumed their expertise in designing and operating large-scale distributed systems are essential for training state of the art models. But the development of R1 suggests otherwise – if these models can be trained using 90% fewer chips, the implications for valuation models are massive.”
Who is on which side in the AI race?
The geopolitical implications of this development have already been widely noted. In a post on X, Marc Andreessen, a venture capitalist and technology advisor to the Trump administration, described DeepSeek-R1 as ‘AI’s Sputnik moment’.
This directly references the Cold War’s Space Race, which the USSR got a head start on when it launched the world’s first artificial satellite, Sputnik 1, in 1958. Trump too has taken note, addressing American tech firms.
“The release of DeepSeek AI from a Chinese company should be a wakeup call for our industries that we need to be laser focused on competing to win,” he said.
“We have the greatest scientists in the world, even Chinese leadership told me that – they said ‘you have the most brilliant scientists in the world’, in Seattle, in various places, Silicon Valley.”

It is important not to look at this in a black and white context though. While American big tech will need to up its game to compete directly with DeepSeek, smaller and medium-sized (SME) tech, payments and fintech firms may stand to gain.
Companies of various sizes have been looking at how to leverage AI for various purposes, from making day-to-day processes more seamless and efficient to dealing with complex AML and fraud prevention requirements. A recent report from UK financial services trade body UK Finance, for example, found six key use cases for AI in financial services.
These are knowledge management and information retrieval, software development and data management, intelligent workflow and email processing, financial crime prevention, legal and contractual text analysis, and desktop productivity.
The presence of a cheaper alternative to those offered by big tech could offer a big cost-cutting opportunity for these SME finance firms looking to leverage AI models to help with tasks such as these.
UK Finance also observed, however, that finance firms are aware of the risks associated with AI usage, such as the potential for LLMs to show bias and for companies to become reliant on third party AI developers.
“Generative AI has created a lot of interest among the public and policymakers,” says Jana Mackintosh, Managing Director of Payments and Innovation at UK Finance. “It is an exciting new technology that has real potential, but also brings potential risks that will need to be managed.”
The fact that DeepSeek-R1 has been produced at such a comparatively low cost may also give SME fintechs confidence that they too could develop their own models, whether to supply to others, reduce reliance on third parties, or both.
“This opens the door for smaller, more agile players to compete, potentially driving more innovation,” says Levy. “With limited resources, they (DeepSeek) proved that scrappy, innovative teams can shake up the industry, even on a shoestring budget.”
Even Trump has expressed a similar sentiment. In his address, the President came across as almost complimentary towards the DeepSeek developers, dropping the often confrontational tone his discourse around China has taken over the past 10 years.
“This is very unusual, when you hear a ‘DeepSeek’, when you hear somebody coming up with something … we always have the ideas, we’re always first,” he said in his address.
“I say this could be a positive development, that it could very much be a positive development. Instead of spending millions and billions you could spend less and come up with the same solution.”
Shaking up stocks
The DeepSeek-R1 launch has had impacts beyond just the signalling of competition. As noted above, a number of companies have suffered on the stock market as a result.
Nvidia, the Californian multinational tech giant, suffered the most widely published stock plunge in the aftermath of the DeepSeek elevation. The company’s share prices plummeted by a total of $600bn, though by the looks of things on the Nasdaq it is slowly starting to rebound.
Other major AI developers – the aforementioned Meta, Microsoft and OpenAI being the most obvious examples – may have been nervously watching the stock tickers while planning for how this new low-cost rival could impact bottom lines.
Meanwhile, crypto has also felt the burn after a long run of soaring valuations amid confidence in the pro-crypto position of Trump’s second US administration. Bitcoin experienced a notable fall after months of rising value, falling to below $100,000 for the first time since early December.
This is partly because DeepSeek projected that adherence market conditions would impact crypto, though a mixed response to Trump’s executive order on cryptocurrency late last week – which wasn’t as concrete as some may have hoped – also played its part.
Crypto is of course no stranger to volatility though – the sector took a huge hit in 2022 following the collapse of FTX, and has rebounded strongly since with Bitcoin achieving the $100,000 mark in November following Trump’s election victory.

Back on the topic of DeepSeek AI, it is important to note that any geopolitical competition between the US and China around AI is far from over. As made clear, Trump wants to see US tech rebound from this and perhaps even benefit from this new low-cost AI solution.
To go back to Sputnik references, the USSR may have been the first country to put a satellite and later a man in space, but the USA ultimately emerged the victor in the Space Race when it put a man on the moon in 1969 – nearly 60 years later, Trump’s government and US big tech are going to be gunning for a repeat on the AI front.
Lastly, regarding DeepSeek-R1’s capabilities, it is also important to remember that any good salesperson knows how to promote their product. Also, the fact that the AI solution was hit by a cyberattack yesterday afternoon, resulting in a temporary limitation of user registrations, suggests it may not be quite 100%, at least not yet.
“While impressive, we should remain sceptical of any claims made by those with a vested interest in their own success,” adds Levy. “Before jumping to conclusions about the broader AI landscape, we need more time to test these models and understand how they achieved these numbers.”