DeepSeek's AI Shakes Markets and Challenges U.S. Tech (Full Transcript)

Speaker 1: The sudden rise of a Chinese startup called DeepSeek sent U.S. talks tumbling Monday. The Nasdaq, which is tech heavy, sank 3.1 percent and the S&P 500 fell 1.5 percent. Now DeepSeek created an artificial intelligence model in much less time and for much less money than U.S. companies have. Its A.I. assistant was Apple's most downloaded free app yesterday. President Trump even spoke about the breakthrough.

Speaker 2: The release of DeepSeek A.I. from a Chinese company should be a wake up call for our industries that we need to be laser focused on competing to win because we have the greatest scientists in the world.

Speaker 1: CBS News Money Watch correspondent Kelly O'Grady joins us now for more on this. I hadn't heard of this before yesterday, Kelly, so why has DeepSeek gained so much popularity so quickly?

Speaker 3: I'm right there with you, Earl, and I think a lot of investors and users were surprised by this. Look, so it's gained so much popularity because DeepSeek may have created a better and more energy efficient chatbot than anything that we've seen in the U.S. We know the technology is there. So tech analysts are saying this is nearly just as good as opening eyes, chat, UBT, Google's Gemini, but it can actually explain its reasoning and logic before it gives you the answer. And that if you believe DeepSeek, they were able to create this with just 2,000 chips versus tens of thousands of chips that U.S. models use. So there's all of this excitement around this because this is something that people haven't necessarily seen before.

Speaker 1: Yeah. And if you believe is such an important caveat, the stock market really pulled back on news of this. And I think folks don't always realize how much of the stock market, yes, is based on fundamentals, but also just emotion and sentiment. So why did we see that pullback?

Speaker 3: Because this really calls into question American chip makers dominance. And you saw that with NVIDIA. The stock lost nearly $600 billion. That is the biggest lost by any stock in a single day in history. And so investors are worried, OK, well, maybe NVIDIA's business model doesn't make as much sense if this company was able to do it with less chips. So that's where you're seeing a lot of concern. But I will say, Errol, I've talked to a number of investors, and they've said if AI is a baseball game, we are in the early innings of a doubleheader. There is a lot of time here to catch up.

Speaker 1: And I'm told that the app will also record your keystrokes. The information lives in China on Chinese servers. So what does DeepSeek's short-term success that we're looking at now mean for U.S.-China competition in the AI space?

Speaker 3: So it was largely believed that the U.S. had a significant edge over China when it comes to the AI race. That's called into question now. Whoever is able to leverage AI technology the best is, it's going to mean economic dominance. It's going to mean national security. The fact that this company was able to do this for less than $6 million versus $100 million or a billion for U.S. models is concerning. And I will also just highlight the ideological concerns. If you have users and you have companies turning to these types of Chinese chatbots, I was playing around with it, Errol. I asked DeepSeek about Tiananmen Square, the massacre that happened there, and it acted as if it didn't exist. So there's all sorts of concerns. And as you heard from President Trump, this is something that I think the U.S. is looking at as a wake-up call.

Speaker 1: A very telling example of how that system thinks or doesn't. Kelly, thank you so much for joining us this morning.