DeepSeek: The Chinese Dark Horse in the Global AI Arena

The case examines DeepSeek, the Chinese AI startup that shook global markets in 2025 when its groundbreaking models caused Nvidia shares to plummet 17% in a single day while its app surpassed ChatGPT on Apple's App Store. Founded in 2023 by Liang Wenfeng, DeepSeek achieved what seemed impossible—creating a world-class AI model at just 1-5% of competitors' costs. The DeepSeek model challenges conventional wisdom about capital requirements, technological leadership, and organizational design in the US high-tech industries.
This timely exploration of a paradigm-shifting company offers crucial insights for courses in technology management, innovation strategy, and global competition. Students use the case information to analyze DeepSeek’s competitive advantages, the reasons for its success, the AI industry’s value chain, China's AI ecosystem, and the strategic challenges faced by DeepSeek.

Students are asked to:
1.Explain the key reasons behind DeepSeek’s rapid success, including its open-source strategy, cost efficiency, and innovative organizational practices.
2.Analyze DeepSeek’s competitive advantage and perform comparative analysis among major global competitors.
3.Describe the (Gen) AI industry’s value chain, identifying key segments to create and capture value
4.Discuss China's broader AI ecosystem, analyzing how Chinese companies can rapidly close the technological gap through cost-effective innovation
5.Evaluate the strategic challenges facing DeepSeek, such as technological constraints and geopolitical pressures, and propose strategies to sustain its competitive position