DeepSeek, a Chinese AI lab, has taken the tech world by storm with its chatbot app rising to the top of the Apple App Store charts, as well as Google Play. This sudden surge in popularity has led Wall Street analysts and technologists to question whether the US can maintain its lead in the AI race and whether the demand for AI chips will sustain.

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. AI enthusiast Liang Wenfeng co-founded High-Flyer in 2015, and in 2023, the company started DeepSeek as a lab dedicated to researching AI tools separate from its financial business.

DeepSeek's technical team is said to skew young, with the company aggressively recruiting doctorate AI researchers from top Chinese universities. Additionally, DeepSeek 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 train its models using compute-efficient techniques, forcing the company to use Nvidia H800 chips, a less-powerful version of the H100 chip available to US companies.

DeepSeek's strong models have been the key to its success. The company 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 release of DeepSeek-V3 in December 2024 only added to DeepSeek's notoriety. According to the company'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, helping it to avoid some of the pitfalls that normally trip up models.

However, there is a downside to DeepSeek's models. Being Chinese-developed AI, they're 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 not clear, but the company prices its products and services well below market value, giving some away for free. The company claims that efficiency breakthroughs have enabled it to maintain extreme cost competitiveness, although some experts dispute the figures supplied. Whatever the case may be, developers have taken to DeepSeek's models, which are available under permissive licenses that allow for commercial use.

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 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 embracing DeepSeek. Some companies are banning the use of DeepSeek, and entire countries, including South Korea, have banned the AI lab's models. New York state has also banned DeepSeek from being used on government devices. As for what DeepSeek's future might hold, it's not clear, but improved models are a given. The US government appears to be growing wary of what it perceives as harmful foreign influence.

The rise of DeepSeek has significant implications for the tech industry, and its impact will be closely watched in the coming months. Will the US be able to maintain its lead in AI, or will China's DeepSeek continue to disrupt the status quo? Only time will tell.