China and The US are always looking to top each other in every sector, but the Asian giant’s new ChatGPT rival is already taking over if results on the Apple store are anything to go by
Robot Wars have broken out after China unveiled a new chatbot that matches America’s best for a fraction of the cost.
Silicon Valley was in meltdown after $1 trillion was wiped from big tech firms’ stocks hours after Chinese start-up DeepSeek unveiled its R1 rival to ChatGPT.
DeepSeek R1 overtook America’s top chatbot to become the most-downloaded free application available on the Apple Store in the US.
Boffins said the Chinese AI assistant uses less data at a fraction of the cost of current models on the market – and works on older, cheaper computer chips.
Firms around the world are now looking to the Chinese for cheap AI in future – ditching expensive American bots.
It is a big blow to new US President Donald Trump whose Make America Great Again mantra has been partly built on the nation’s reputation as global tech leader.
Elvis Saravia, an AI researcher and co-founder of UK-based tech consulting firm DAIR.AI (corr), wrote on X: “This is wild and totally unexpected.’’
Venture capital investor Marc Andreessen called the new Chinese model `AI’s Sputnik moment’ – drawing a comparison with the Soviet Union stunning the US by putting the first satellite into orbit.
“DeepSeek R1 is one of the most amazing and impressive breakthroughs I’ve ever seen,’’ he added.
US tech expert Alvin Wang Graylin said it showed the `perceived lead’ the US `once had has narrowed significantly’.
He called for the two nations to `pursue a collaborative approach to building advanced AI vs continuing on the current no-win arms race approach’.
But Trump is unlikely to settle for the US being second best.
Last week he pledged to plough £400 billion into Stargate which he said will be the `largest AI infrastructure project in history’.
However DeepSeek has cast doubt on whether the US can sustain its leadership in AI by spending billions of dollars on chips.
The Chinese company has taken the market by storm despite claiming to have far fewer Nvidia (corr) chips.
Nvidia – one of the biggest winners from the AI revolution – was set to lose £240bn of its market value as its share price tanked.
Microsoft shares were down 4.3% while European chip equipment maker ASML’s sank by 9% and Dutch semiconductor company ASM International’s by 12.5%.
The rout extended beyond traditional tech names.
Siemens Energy – which supplies electrical hardware for AI infrastructure – saw shares plummet 20%.
Schneider Electric, a French maker of electrical power products that has invested heavily in services for data centres, fell 9.3%.
Luca Paolini, chief strategist at Pictet Asset Management, said: “It shows how vulnerable the AI trade still is – like every trade that is consensus and based on the assumption of an unassailable lead.’’
In a bid to stifle China’s tech advancement the US had imposed stringent restrictions on chip exports under former President Joe Biden – banning the sale of Nvidia’s most advanced models to the country.
But that has not stopped DeepSeek dropping a bot bomb.
Founded by hedge fund manager Liang Wenfeng (corr) last week releasing a detailed paper explaining how to build a large language AI model that could automatically learn and improve itself.
Mitul Kotecha, Asia head of emerging markets macro and foreign exchange strategy at Barclays, said: “It seems as if there is a bit of reality dawning that China has not been sitting idle even as these tariffs and investment restrictions on tech companies have been put in place.’’
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