US stocks fell sharply after a surprise advance by Chinese artificial intelligence firm DeepSeek.

Chinese e-commerce giant Alibaba has released a new version of its AI model that it claims will outperform its competitors. Deepseek, the Chinese AI that unsettled American tech stocks, released its latest version on January 20.

Deepseek sets itself apart as it was built at a fraction of the cost of OpenAI, the top open-source AI model to date. Alibaba has claimed that the Qwen 2.5 AI model outperforms DeepSeek-V3.

Deepseek’s technology could be a game-changer. Deepseek shows that we can do more with existing computing power than previously thought. Moreover, deepseek is offering its model for free right now. Therefore, the market needs to price in a slower adoption rate of high-performance computing and the revenues of companies selling these AI models.