It is rare that a single product from a less known startup can shake the foundations of an entire industry. This exactly happened on January 27 when Chinese ultra-efficient and low-cost open-source AI, DeepSeek, disrupted the global AI world. The ripple effects were massive and tech giants in the U.S. witnessed their stock prices tumbling down drastically. Nvidia alone lost more than $600 billion in market value in a single session.
Venture capitalist Marc Andreessen compared the release of DeepSeek to the launching of of the Sputnik satellite of Soviet Union in 1957. It was a historic moment that signaled that the U.S. was losing ground in the space race. Similarly, the rise of DeepSeek has challenged the assumption that AI dominance belongs solely to American firms like OpenAI, Google and Amazon-backed Anthropic.
The AI race for years seemed to be controlled by Western companies with deep pockets and access to cutting-edge chips. The prevailing belief was that AI development required billions of dollars in investment. DeepSeek has changed the notion by proving that powerful AI can be developed at a fraction of the cost. It was just $6 million compared to OpenAI’s estimated $100 million for GPT-4.
The emergence of DeepSeek should not have come as a surprise. The concept of disruptive innovation has been well documented. A Harvard Business Review article from 1995 titled “Disruptive Technologies: Catching the Wave” predicted how low-cost alternatives could upend markets.
India remains heavily reliant on Western AI tools and the success of DeepSeek highlights the power of self-reliance and strategic investment in foundational AI models. Indian startups and policymakers need to rethink their approach whether to rely on foreign AI models in the long run or the other way.