Chinese AI lab DeepSeek has taken the tech world by storm, with its chatbot app rising to the top of the Apple App Store charts and sparking concerns about the US's lead in the AI race and the demand for AI chips. The company's AI models, trained using compute-efficient techniques, have impressed Wall Street analysts and technologists alike, leading many to question whether the US can maintain its dominance in the field.

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. Founded by AI enthusiast Liang Wenfeng in 2015, High-Flyer launched DeepSeek as a lab dedicated to researching AI tools separate from its financial business in 2023. With High-Flyer as one of its investors, the lab spun off into its own company, also called DeepSeek.

DeepSeek's technical team is notable for its youth and aggressive recruitment of 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, albeit using less-powerful Nvidia H800 chips.

The company's AI models have been the real game-changer, however. DeepSeek unveiled its first set of models, including DeepSeek Coder, DeepSeek LLM, and DeepSeek Chat, in November 2023. But 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 release of DeepSeek-V3 in December 2024 only added to the company's notoriety. According to 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, there is a downside to DeepSeek's models. As Chinese-developed AI, they are subject to benchmarking by China's internet regulator to ensure that its responses "embody core socialist values." This means that DeepSeek's chatbot app, for example, won't answer questions about Tiananmen Square or Taiwan's autonomy.

DeepSeek's business model is unclear, but the company's pricing strategy has been described as "disruptive." The company prices its products and services well below market value, and gives others away for free. According to Clem Delangue, the CEO of Hugging Face, one of the platforms hosting DeepSeek's models, developers 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% on Monday, 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, Microsoft's platform that brings together AI services for enterprises under a single banner.

However, not everyone is a fan of DeepSeek. Some companies are banning the company's models, and entire countries and governments are also taking action. The US government appears to be growing wary of what it perceives as harmful foreign influence, which could have implications for DeepSeek's future.

As the tech industry continues to grapple with the implications of DeepSeek's rise to fame, one thing is clear: the company's AI models have sent shockwaves through the industry, and their impact will be felt for a long time to come.