The euphoria surrounding artificial intelligence (AI) has quickly turned to panic. Since the early trading on January 27, the market value of Nvidia, a leading AI chip manufacturer, has fallen by 17 percent. The stock prices of Alphabet, Amazon and Microsoft, the US cloud computing triumvirate, have dropped by 3 percent.
In China, the AI start-up that has shaken the global tech world and wiped out over a billion dollars in market value, has earned a nickname that conveys extreme frugality: Deepseek is the Pinduoduo of the AI industry, it is often said. Pinduoduo is the discount platform of Chinese e-commerce and the parent company behind the shopping app Temu. Deepseek’s development costs are significantly lower than those of Chinese and global competitors.
The trigger for the stock crash was the realization that software from DeepSeek, using artificial intelligence, can be trained with much less computational power – and therefore fewer Nvidia chips – than previously thought. DeepSeek aims to train its new AI model with costs of less than six million dollars and on a few stripped-down Nvidia chip systems.
Behind the company is Liang Wenfeng, one of the most astute minds in the Chinese financial world. Unlike many other representatives of the Chinese AI world, his career is not marked by stints at large corporations or foreign companies. Liang, born in 1985, built the quant fund High-Flyer in the previous decade, which at one point managed over 100 billion renminbi yuan, equivalent to over 13 billion euros, before he left the fund in 2020. His wealth was earned with algorithms that invested more intelligently than the many emotional small investors in China. DeepSeek initially did not respond to a request from the German newspaper FAZ.
Liang is known for placing great emphasis on algorithms. He once caused a stir by arguing that only funds in which algorithms made investment decisions were genuine quantitative funds. Liang’s team at DeepSeek is not large, with the company reportedly having fewer than 200 employees. However, the entrepreneur is on an expansion course.
Liang demands self-awareness of the Chinese AI industry and fundamental research. “China needs someone who is at the forefront of technology” he said in an interview, making it clear that it is not just about financial profit for him, but a mission.