Chinese AI lab DeepSeek has taken the world by storm with its chatbot app, which has risen to the top of the Apple App Store charts and sparked a heated debate about the US's lead in the AI race. The app's success has also raised questions about the demand for AI chips and the potential implications for the tech industry.

But where did DeepSeek come from, and how did it rise to international fame so quickly? The company's origins can be traced back to High-Flyer Capital Management, a Chinese quantitative hedge fund that uses AI to inform its trading decisions. In 2023, High-Flyer started DeepSeek as a lab dedicated to researching AI tools separate from its financial business. With High-Flyer as one of its investors, the lab spun off into its own company, also called DeepSeek.

DeepSeek's technical team is said to skew young, with the company aggressively recruiting doctorate AI researchers from top Chinese universities. The company also hires people without any computer science background to help its tech better understand a wide range of subjects. Despite being affected by US export bans on hardware, DeepSeek has managed to build its own data center clusters for model training, using Nvidia H800 chips, a less-powerful version of the H100 chip available to US companies.

DeepSeek unveiled its first set of models, including DeepSeek Coder, DeepSeek LLM, and DeepSeek Chat, in November 2023. However, it wasn't until the release of its next-gen DeepSeek-V2 family of models last spring that the AI industry started to take notice. DeepSeek-V2, a general-purpose text- and image-analyzing system, performed well in various AI benchmarks and was far cheaper to run than comparable models at the time.

The company's latest model, DeepSeek-V3, launched in December 2024, has only added to DeepSeek's notoriety. According to DeepSeek's internal benchmark testing, DeepSeek V3 outperforms both downloadable, openly available models like Meta's Llama and "closed" models that can only be accessed through an API, like OpenAI's GPT-4o. Equally impressive is DeepSeek's R1 "reasoning" model, which effectively fact-checks itself and performs as well as OpenAI's o1 model on key benchmarks.

However, being a Chinese-developed AI, DeepSeek's models are subject to benchmarking by China's internet regulator to ensure that its responses "embody core socialist values." This has raised concerns about the potential limitations and biases of DeepSeek's models, particularly in domains such as politics and history.

Despite these concerns, developers have taken to DeepSeek's models, which are available under permissive licenses that allow for commercial use. According to Clem Delangue, the CEO of Hugging Face, one of the platforms hosting DeepSeek's models, developers on Hugging Face have created over 500 "derivative" models of R1 that have racked up 2.5 million downloads combined.

DeepSeek's success has been described as "upending AI" and "over-hyped." The company's success was at least in part responsible for causing Nvidia's stock price to drop by 18% in January, and for eliciting a public response from OpenAI CEO Sam Altman. Microsoft has also announced that DeepSeek is available on its Azure AI Foundry service, while Meta CEO Mark Zuckerberg has said that spending on AI infrastructure will continue to be a "strategic advantage" for Meta.

However, not everyone is convinced of DeepSeek's benefits. OpenAI has called DeepSeek "state-subsidized" and "state-controlled," and recommends that the US government consider banning models from DeepSeek. Some companies and governments, including South Korea and New York state, have already banned DeepSeek from being used on government devices.

As for what DeepSeek's future might hold, it's not clear. Improved models are a given, but the US government appears to be growing wary of what it perceives as harmful foreign influence. In March, The Wall Street Journal reported that the US will likely ban DeepSeek on government devices. Despite these challenges, DeepSeek's rapid rise to fame has undoubtedly shaken up the AI industry and raised important questions about the future of AI development.