Responding to the news, Trump said the latest developments in China’s AI industry may be “a positive” for the US.

“If you could do it cheaper, if you could do it [for] less [and] get to the same end result. I think that’s a good thing for us,” he told reporters on board Air Force One.

He also said he was not concerned about the breakthrough, adding the US will remain a dominant player in the field.

However, DeepSeek has raised cyber security concerns in some countries with Australian science minister Ed Husic urging caution.

He told Australia’s national broadcaster ABC: “There are a lot of questions that will need to be answered in time on quality, consumer preferences, data and privacy management.”

DeepSeek is powered by the open source DeepSeek-V3 model, which its researchers claim was trained for around $6m (£4.2m) – significantly less than the billions spent by rivals. But this claim has been disputed by others in AI.

Its emergence comes as the US is restricting the sale of the advanced chip technology that powers AI to China.

To continue their work without steady supplies of imported advanced chips, Chinese AI developers have shared their work with each other and experimented with new approaches to the technology.

This has resulted in AI models that require far less computing power than before.

It also means that they cost a lot less than previously thought possible, which has the potential to upend the industry.

Following the shock to markets in the US on Monday, the FTSE 100 stock index of the UK’s biggest publicly-listed companies appeared resilient in early trading on Tuesday, rising by 0.46%.

Futures on the tech-heavy Nasdaq index were also up by 0.1% after Nvidia stock had ticked up slightly in after-hours trading.

But shares in Japanese AI-related firms including Advantest, Softbank and Tokyo Electron fell sharply, helping to push the benchmark Nikkei 225 down by 1.4%.

Several other markets in Asia are closed for the Lunar New Year holiday. Mainland China’s financial markets will be shut from Tuesday and will reopen on 5 February.