Rising AI star DeepSeek has close ties to the Chinese government that could explain its rapid progress from a 1 million yuan (US$138,000) startup in 2023 to a major global challenger in the industry, according to a recent investigation by RFA Cantonese.
The open-source artificial intelligence model founded by 40-year-old Liang Wenfeng knocked a US$1 trillion-sized hole in an AI-fueled rally on global stock markets on Monday when it topped app charts ahead of ChatGPT, in what many saw as a challenge to American dominance in the sector.
DeepSeek’s popularity roiled tech shares around the world, knocking US$1 trillion off their value, while near-monopoly holder Nvidia lost nearly US$600bn in market capitalization after its shares plummeted 17% on Monday.
U.S. President Donald Trump said DeepSeek should serve as a “wake-up call” to the U.S. industry, which needed to be “laser-focused on competing to win.”
Trump last week announced the launch of a US$500 billion AI initiative led by OpenAI, which is behind the generative AI service ChatGPT, Texas-based Oracle and Japan’s SoftBank.
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DeepSeek’s meteoric emergence hasn’t been without its problems, however.
The company was hit by “degraded performance” due to a cyberattack that has “temporarily limited” who can register to use the app, according to its status page on Tuesday.
“Due to large-scale malicious attacks on DeepSeek’s services, we are temporarily limiting registrations to ensure continued service,” the update said. “Existing users can log in as usual. Thanks for your understanding and support.”
Party links
The app’s sudden success comes after OpenAI suspended services to China, Hong Kong and Macau last July, and despite ongoing export bans on high-end computer chips by the United States.
A recent investigation by RFA Cantonese found that the company has strong connections with the ruling Chinese Communist Party, which has thrown its full political weight behind developing AI.
DeepSeek’s founder and backer Ningbo High-Flyer Quantitative Investment Management Partnership was listed as a National High-tech Enterprise by authorities in its home province of Zhejiang in December 2023.
Such companies enjoy preferential tax policies, as well as state subsidies to carry out research and development, suggesting that DeepSeek’s rise to prominence has the support of the Chinese government at the highest level.
Liang was recently invited to Beijing to give his “opinions and suggestions” to Chinese Premier Li Qiang on his draft government work report, which will be delivered to the National People’s Congress in March, the Communist Party newspaper the People’s Daily reported in a Jan. 21 report on its front page.
The move puts Liang’s company at the heart of the government’s vision for an economic recovery driven by high-tech innovation.
On Jan. 20, Li chaired a symposium of experts, entrepreneurs and representatives from the fields of education, science, culture, health and sports to hear their comments, the article said.
Afterwards, Li told the meeting: “It is necessary to use technological innovation to promote the conversion of old and new driving forces [and] concentrate on breakthroughs in key core technologies and cutting-edge technologies.”
US restrictions
Beijing’s sense of urgency stems at least in part from U.S. restrictions on the export of high-end components to China.
Last month, Washington announced a new semiconductor export control package against China, curbing exports to 140 companies, the latest in a slew of measures aimed at blocking China’s access to and production of chips capable of advancing artificial intelligence for military purposes.
According to a Jan. 22 report by state-backed Chinese media outlet The Paper, DeepSeek’s Firefly-2 computer was equipped with 10,000 A100 GPU chips that were similar in performance to Nvidia’s DGX-A100 chips, but cost only half, and used 40% less energy.
“All of that requires extremely strong financial backing,” the paper said, but quoted Liang as saying that the company has “no financing plan for the short term,” and that its main problem is a shortage of high-end chips, not cash.
It cited reports that Liang had stockpiled more than 10,000 Nvidia A100 chips before the U.S. banned their export to China, and quoted AI consultant Dylan Patel as saying that the true number was closer to 50,000.
Translated by Luisetta Mudie. Edited by Malcolm Foster.