Why is DeepSeek a 'big moment' for AI? Experts explain.

China-based AI app DeepSeek, which sits atop the app store charts, made its presence widely known Monday by triggering a sharp drop in share prices for some tech giants.

Shares of Nvidia, the top AI chipmaker, plunged more than 17% in early trading on Monday, losing nearly $590 billion in market value. The tech-heavy Nasdaq plummeted 3.5%.

The DeepSeek chatbot, known as R1, responds to user queries just like its U.S.-based counterparts. Early testing released by DeepSeek suggests that its quality rivals that of other AI products, while the company says it costs less and uses far fewer specialized chips than do its competitors.

SEE ALSO: Tech stocks tumble as a Chinese competitor threatens to upend the AI industry; Nvidia down 17%

The product could upend the AI industry, putting pressure on other firms to lower their costs while intensifying competition between U.S. and Chinese companies, analysts told ABC News.

Concerns about data security and censorship also may expose DeepSeek to the type of scrutiny endured by social media platform TikTok, the experts added.

"This is a big moment," Gary Marcus, a professor emeritus of psychology and neuroscience at New York University, who specializes in AI, told ABC News.

DeepSeek did not immediately respond to ABC News' request for comment.

Here's what to know about DeepSeek, and its implications for the future of AI.

What is DeepSeek?

DeepSeek, like OpenAI's ChatGPT, is a chatbot fueled by an algorithm that selects words based on lessons learned from scanning billions of pieces of text across the internet.

While made in China, the app is available in multiple languages, including English. DeepSeek soared to the top of Apple's App Store chart over the weekend and remained there as of Monday.

The company said it experienced some outages on Monday affecting user signups. "Due to large-scale malicious attacks on DeepSeek's services, we are temporarily limiting registrations to ensure continued service," DeepSeek said in a statement.

DeepSeek is fully available to users free of charge. By contrast, ChatGPT retains a version available for free, but offers paid monthly tiers of $20 and $200 to access additional capabilities.

Developers of the system powering the DeepSeek AI, called DeepSeek-V3, published a research paper indicating that the technology relies on much fewer specialized computer chips than its U.S. competitors do.

DeepSeek also says that it developed the chatbot for only $5.6 million, which if true is far less than the hundreds of millions of dollars spent by U.S. companies in the sector.

"The lower cost to train DeepSeek means it can be offered at a lower cost," Oren Etzioni, CEO of Allen Institute for AI and a computer science professor at the University of Washington, told ABC News. "That puts pressure on other companies to lower their prices."

DeepSeek's developers opted to release it as an open-source product, meaning the code that underlies the AI system is publicly available for other companies to adapt and build upon.

Llama, the AI model released by Meta in 2017, is also open source. By contrast, ChatGPT as well as Alphabet's Gemini are closed-source models.

Proponents of open source say that publicly available code allows a wide community of AI engineers to identify and fix flaws in a system, or tailor it for a purpose separate from its originally intended function.

Supporters of closed source argue that the best way to safeguard AI is to keep the computer code private so it stays out of the hands of bad actors who might repurpose it for malicious ends.

What does the emergence of DeepSeek mean for the AI industry?

DeepSeek flexes the strength of the Chinese tech sector in an industry previously viewed by many analysts as one dominated by U.S. firms, experts said.

For some, the sudden arrival of a top China-based competitor raises concerns about data security and content manipulation similar to those leveled at TikTok, which is owned by Chinese company ByteDance.

Regarding the former users on social media have posted numerous examples of DeepSeek choosing to forego answers on topics potentially sensitive to the Chinese government, such as the 1989 Tiananmen Square massacre of anti-government protestors.

"It's clear that there's some censorship built into the system," Marcus said. "We don't want governments in control of what people can say."

Both foreign-owned and U.S.-based AI chatbots pose data concerns, however, since users sometimes enter personal or intimate information, which in turn could be used for commercial purposes, Marcus added.

"You have to assume that anything you type into a large language model could be seen by someone else," Marcus said.

Still, DeepSeek's low-cost technological advance using outdated chips marks a major new entry into the AI market, Sosnick said, in turn forcing people to "rethink assumptions that they had."

The emergence of a relatively cost-efficient alternative to other AI chatbots helps explain Monday's dip in the share value of Nvidia, which premises future growth on increased demand for new, expensive chips, Etzioni said.

In a statement to ABC News, Nvidia described DeepSeek as "an excellent AI advancement," noting how the firm leveraged "widely-available models and compute that is fully export control compliant" the latter apparently referring to controls put in place by the Biden administration that prohibit U.S. manufacturers from selling such specialized chips to firms in China.

Etzioni said the open-source nature of DeepSeek also could challenge the profitability of other AI firms aiming to charge third parties for access to their products.

"We're soon going to see many models built on DeepSeek," Etzioni said.