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A sudden shift in the AI landscape sent tremors through Wall Street on Monday as a Chinese competitor unveiled a ChatGPT-style model, prompting former President Donald Trump to describe it as a “wake-up call” for America’s tech sector.

DeepSeek’s latest release initially went unnoticed, coinciding with Trump’s inauguration last week. However, the Chinese AI startup’s chatbot quickly gained momentum, climbing to the top spot among free apps on Apple’s U.S. App Store and surpassing OpenAI’s ChatGPT.

The industry’s real concern stemmed from DeepSeek’s assertion that it developed its R1 model at significantly lower costs than major tech companies’ AI investments, particularly in expensive Nvidia hardware and software. This revelation proved particularly significant given that the AI boom, sparked by ChatGPT’s late 2022 debut, had transformed Nvidia into one of the world’s most valuable corporations.

The announcement created ripples across the U.S. tech sector, raising questions about the necessity of massive AI investments when a Chinese competitor could apparently achieve similar results more cost-effectively. The development also challenged Washington’s strategy of maintaining technological superiority over China.

Trump swiftly addressed the situation Monday, stating the DeepSeek launch “should be a wake-up call for our industries that we need to be laser-focused on competing to win.” He suggested a potential upside for U.S. tech giants, noting: “instead of spending billions and billions, you’ll spend less, and you’ll come up with hopefully the same solution.”

OpenAI’s CEO Sam Altman expressed enthusiasm on X about the new competition, calling DeepSeek’s R1 “an impressive model, particularly around what they’re able to deliver for the price,” and indicated plans to accelerate some OpenAI releases.

This development coincides with ongoing U.S. efforts to either ban or force the sale of Chinese-owned TikTok in America. David Sacks, Trump’s AI advisor and prominent tech investor, defended the administration’s decision to reverse Biden-era executive orders establishing AI development safety standards, arguing on X that these regulations “would have hamstrung American AI companies without any guarantee that China would follow suit.”

Chamber of Progress CEO Adam Kovacevich emphasized the shifting priority: “Now the top AI concern has to be ensuring (the United States) wins.” Tech investor Marc Andreessen, a Trump ally, likened the situation to the Soviet Union’s 1957 Sputnik launch, calling it “AI’s Sputnik moment.”

XTB research director Kathleen Brooks cautioned that China’s rapid advancement in AI could fundamentally alter the industry’s economics. Microsoft CEO Satya Nadella promoted the benefits of cheaper AI on social media, though he had previously warned at Davos about taking Chinese developments “very, very seriously.”

Australia’s Science Minister Ed Husic urged caution regarding the chatbot’s privacy implications, telling ABC: “There are a lot of questions that will need to be answered in time on quality, consumer preferences, data and privacy management. I would be very careful about that. These type of issues need to be weighed up carefully.”

Major tech companies continue substantial AI investments, with Microsoft planning $80 billion and Meta committing at least $60 billion this year. Nvidia’s stock plummeted 17% Monday, particularly notable given DeepSeek’s limited access to Nvidia’s advanced chips due to U.S. export restrictions.

The MIT Technology Review noted that these restrictions are “driving startups like DeepSeek to innovate in ways that prioritize efficiency, resource-pooling, and collaboration.” While Elon Musk and ScaleAI’s CEO suggested DeepSeek might be secretly accessing restricted H100 chips, Hong Kong investor Jen Zhu Scott dismissed such claims on X as sounding “like a rich kids team got outplayed by a poor kids team.”

Nvidia responded with a statement confirming DeepSeek’s technology was “fully export control compliant.”