DeepSeek, a little-known Chinese startup, has sent shockwaves through the global tech sector with the release of an artificial intelligence (AI) model whose capabilities rival the creations of Google and OpenAI.

DeepSeek-R1’s creator says its model was developed using less advanced, and fewer, computer chips than employed by tech giants in the United States.

In a research paper released last week, the model’s development team said they had spent less than $6m on computing power to train the model – a fraction of the multibillion-dollar AI budgets enjoyed by US tech giants such as OpenAI and Google, the creators of ChatGPT and Gemini, respectively.

Marc Andreessen, one of the most influential tech venture capitalists in Silicon Valley, hailed the release of the model as “AI’s Sputnik moment”.

The sudden emergence of a small Chinese startup capable of rivalling Silicon Valley’s top players has challenged assumptions about US dominance in AI and raised fears that the sky-high market valuations of companies such as Nvidia and Meta may be detached from reality.

On Monday, Nvidia, which holds a near-monopoly on producing the semiconductors that power generative AI, lost nearly $600bn in market capitalisation after its shares plummeted 17 percent.

US President Donald Trump, who last week announced the launch of a $500bn AI initiative led by OpenAI, Texas-based Oracle and Japan’s SoftBank, said DeepSeek should serve as a “wake-up call” on the need for US industry to be “laser-focused on competing to win”.