Silicon Valley Hit by AI’s ‘Sputnik Moment’ as DeepSeek Overtakes ChatGPT
First came ChatGPT, then Gemini, followed by Grok—but when DeepSeek entered the scene, it sent shockwaves across the tech industry, made investors anxious, and wiped off $1 trillion from US tech giants in a single day. Touted as AI’s “Sputnik moment,” the revolutionary AI assistant shot to the top of Apple’s App Store, surpassing even ChatGPT in downloads across the United States.
The company behind this meteoric rise? DeepSeek, a 20-month-old Chinese startup founded by Liang Wenfeng, a 39-year-old engineer with humble beginnings in Guangdong, China. His creation has not only captivated global attention but has also disrupted the AI landscape with an approach that Silicon Valley never saw coming.
A Startup That Changed the Game
DeepSeek’s chatbot is similar to ChatGPT but with a defining twist—it delivers high-level AI experiences at a fraction of the cost. Launched in January 2025, it quickly shot to the top of the U.S. iOS App Store, overtaking ChatGPT in downloads and triggering a massive sell-off in Nvidia’s stock, resulting in a $592.7 billion loss in market value.
The secret to DeepSeek’s rapid ascent lies in its open-source philosophy, allowing developers worldwide to tinker, modify, and build on its AI models. With its cutting-edge search engine, DeepSeek goes beyond keyword matching by using machine learning, natural language processing, and semantic search to understand user intent better than traditional tools.
What sets it apart is not just its performance but its cost-efficiency—offering AI models that operate 20 to 50 times cheaper than competitors like OpenAI. This breakthrough has investors worried that the era of expensive AI models powered by high-priced chips may be ending.
The Man Behind the AI Revolution
At the heart of DeepSeek’s success is its enigmatic founder, Liang Wenfeng, who has emerged as one of China’s most influential tech figures. Raised in a modest household in Guangdong during the 1980s, Liang’s journey to global prominence defies the odds. His father was a primary school teacher, and Liang pursued his education at Zhejiang University, one of China’s top-ranked institutions.
Liang’s entrepreneurial journey began in 2008 when he and two university classmates started trading domestic stocks. By 2015, they adopted a systematic approach powered by machine learning, founding High-Flyer, a financial technology company.
However, it was in April 2023 that Liang made his boldest move, launching an artificial general intelligence (AGI) lab separate from High-Flyer’s financial business. Just a month later, this lab became its own company—DeepSeek.
From Stock-Picking AI to Global AI Leader
DeepSeek made its first major splash in November 2023 with the release of its DeepSeek-Coder model, offered for free to researchers and commercial users alike. By May 2024, its DeepSeek-V2 model ignited a fierce AI price war in China, earning the company the nickname “Pinduoduo of AI” for its cost-effective approach. Major players like ByteDance, Tencent, Baidu, and Alibaba were forced to slash their AI model prices to compete.
Despite its low prices, DeepSeek managed to stay profitable, a feat many of its rivals struggled to achieve.
By January 27, 2025, DeepSeek’s AI Assistant, powered by its V3 model, had surpassed ChatGPT as the highest-rated free app on the U.S. iOS App Store. Benchmark tests revealed that DeepSeek’s chatbot could answer questions, solve logic problems, and write computer programs on par with leading American AI products.
The Innovation That Surprised Silicon Valley
Liang’s success has sparked both admiration and anxiety in the tech world. His team’s ability to innovate despite U.S. export controls on advanced chips has been a defining factor in DeepSeek’s rise. In October 2022, the U.S. restricted China’s access to cutting-edge chips like Nvidia’s H100. Rather than faltering, Liang and his team optimized their model architecture to thrive on limited resources.
DeepSeek’s ingenuity paid off, making it a formidable competitor despite having only a fraction of the resources available to companies like OpenAI and Meta.
“The problem we are facing has never been funding, but the export control on advanced chips,” Liang said in a 2024 interview with 36Kr, a Chinese tech publication. His team had to develop more efficient methods to train their models, turning a challenge into a competitive advantage.
Liang’s approach to running DeepSeek is unconventional. He shuns rigid hierarchies and emphasizes a bottom-up culture where innovation thrives.
“I believe innovation is, first and foremost, a matter of belief. Why is Silicon Valley so innovative? Because they dare to try,” Liang explained in a rare interview. “When ChatGPT debuted, China lacked confidence in frontier research. From investors to major tech firms, many felt the gap was too wide and focused instead on applications. But innovation requires confidence, and young people tend to have more of it.”
China’s AI Future
Liang is determined to push China from a follower position to a leadership role in AI.
“We often say there’s a one- or two-year gap between China and the US, but the real gap is between originality and imitation. If this doesn’t change, China will always be a follower. That’s why some exploration is inevitable,” he asserted.
His vision for DeepSeek goes beyond commercial success. Liang sees his company as a beacon for innovation, inspiring China to break free from its reputation as a technological imitator.
Investor Anxiety and a New Tech Cold War
The rise of DeepSeek has sparked a wave of anxiety among U.S. tech investors. The $592.7 billion loss in Nvidia’s market value was just the tip of the iceberg. Analysts fear that DeepSeek’s cost-efficient models could undermine demand for expensive AI infrastructure, threatening the business models of chipmakers and cloud service providers.
The international media has dubbed DeepSeek’s rise a “Sputnik” moment, drawing parallels to the Cold War-era space race. Just as the Soviet Union’s launch of Sputnik shook American confidence, DeepSeek’s success has forced Silicon Valley to confront the possibility that China may lead the next wave of AI innovation.
As DeepSeek continues to gain traction, the global tech landscape is bracing for further disruption. Liang Wenfeng’s creation has proven that ingenuity, not just resources, can drive technological breakthroughs. With DeepSeek’s open-source model fostering a new wave of innovation, the world is entering uncharted territory.
One thing is certain: the AI race is far from over, and DeepSeek has firmly positioned itself as a frontrunner. The question now is how Silicon Valley will respond to this formidable new challenger.
