DeepSeek: US AI tech giants face ‘Sputnik moment’ which could start new race

The rapid rise of Chinese AI startup DeepSeek has been described as the US tech sector’s ‘Sputnik moment’ which “may well kickstart a new, even more energetic race”.

US tech stocks took a battering yesterday after gaining global attention over its seemingly cheaper AI model which sparked a sell off in shares for its competitors.

The sudden downturn can be best illustrated by the fact that shares in chip giant Nvidia plummeted by around $600bn (£428bn).

Now an expert at University of Salford’s Business School has described the last few days as the US tech sector’s ‘Sputnik moment’, likening what’s happened to the Soviet Union sending a man into space for the first time, beating the United States.

Dr Richard Whittle has also argued that there is a rethink in the market taking place about if “equivalent models can be developed for a fraction of the cost, does this speed up adoption”?

He also adds that the emergence of DeepSeek “raises interesting possibilities” for the UK.

‘For the UK, DeepSeek raises interesting possibilities’

Dr Whittle said: “Taking a step back, DeepSeek’s release of a premium level AI tool, available freely, with a reported (comparatively) miniscule development cost has shaken faith in Silicon Valley and American dominance in the rapidly developing AI market.

“The economics are quite simple, if a reasoning model can be developed so cheaply, then where is the value in the existing giants such as OpenAI, who have heavily invested in – what could be revealed to be – inefficient development models.

“Likewise, heavy investment in the chips required to develop these models may also be questioned, explaining Nvidia’s massive drop in share price yesterday.

“However, pre-trading today points to some recovery in position, as it is expected that existing strengths and capital positions may allow for increased development of model capability

“Economics aside, let’s turn to the impact of a freely available premium model. I should note various concerns about data and privacy, and urge a considered and thought out use strategy, even though there are plenty of concerns around privacy with the existing US dominant models too.”

Dr Whittle also pointed to a rethink going on in the market right now over “if equivalent models can be developed for a fraction of the cost, does this speed up adoption?”

He said: “Certainly, firms which have already locked into expensive platforms and subscriptions may reconsider their investment. Where does return on investment for model build come from, is there is a cheaper option?

“For the UK, DeepSeek raises interesting possibilities. The Prime Minister’s AI Action Plan pointed to sovereign AI, more efficient development methods may help with this.

“However, the major issues facing AI in the UK are poor fundamental infrastructures and a declining talent base which limit our participation in the race. DeepSeek may well have sped everyone up, but not equally.

“The ability to capitalise on these developments requires considerable spending and strategic planning.

“I would however expect the advances and efficiencies in model development to be incorporated into the US tech sector rapidly.

“While the DeepSeek Sputnik moment may well kickstart a new, even more energetic race, one thing that may spur on the American tech sector is it feeling threatened.”