Chinese startup DeepSeek’s AI Assistant is taking the artificial intelligence world by storm. The AI assistant overtook OpenAI’s ChatGPT on Monday to become the top-rated free app on Apple’s (AAPL) U.S. App Store. However, the AI assistant’s surging popularity resulted in the startup’s website being hit by outages. The company later resolved the Application Programming Interface (API) and login issues – its longest outage in 90 days.
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Deepseek Is Challenging U.S. Dominance on AI
The popularity of DeepSeek challenges assumptions about U.S. dominance in artificial intelligence. The AI assistant was first released as an app on January 10 and is powered by the DeepSeek-V3 model. It has increasingly gained popularity among U.S. users, according to a Reuters report citing data from research firm Sensor Tower. Its creators claim that DeepSeek-V3 rivals the world’s leading AI models, both open- and closed-source.
AI models like DeepSeek and ChatGPT rely on advanced chips for training. Since 2021, the Biden administration has expanded bans on exporting such chips to China. However, DeepSeek’s researchers revealed that the model was trained using Nvidia’s (NVDA) H800 chips at a cost of under $6 million. This claim, though debatable, has prompted debate about the effectiveness of U.S. export controls.
In fact, the popularity of DeepSeek resulted in shares of Nvidia (NVDA) tanking by 14% in trading on Monday.
Hedge Funds React to DeepSeek’s AI Challenge
Meanwhile, in a separate development, a Reuters report cited analysts from Goldman Sachs who noted that hedge funds are closely monitoring the implications of DeepSeek’s rise for U.S. AI leadership. Despite opportunities in sectors adjacent to AI, such as data centers and EV charging infrastructure, hedge funds have been cautious, reducing exposure to tech-related stocks over the past year. Although some funds have maintained long positions, total bets remain subdued, reflecting uncertainty about the U.S.-led AI boom.
Furthermore, DeepSeek’s rapid ascent highlights China’s potential to disrupt the global AI landscape. According to the report, citing Bruno Schneller, MD at Erlen Capital Management, hedge funds seem to be taking a “wait-and-see” approach on U.S. stocks in the AI sector.
What Is the Best AI Stock to Buy?
For investors interested in investing in the artificial intelligence sector, we have rounded up the best stocks to buy in this sector, using the TipRanks Stocks Comparison tool.
