Now that the dust has settled somewhat, we can say in the grand scheme of things that Deepseek hurts as much as it does, because it is China's first major victory over America in the tech war.
To preface, the tech war has been going on for some 6 odd years now, with the opening salvo fired at ZTE, which caught the Chinese tech sector completely flatfooted. Since that episode though, most of the background back and forth between US and China has resulted in little changes, with most of the major battles largely resulting draws. Take Huawei, yes they maintained a significant global 5g presence and their phone business came roaring back in China. But I would still call it a draw, until Huawei is able to actually export its phones again. TikTok too is a draw, since the ban has only been delayed and the app still can't be downloaded in the US, although the XHS surge was definately an unforseen consequence of that battle.
Deepseek though is catching the Americans completely flatfooted the sameway the ZTE ban caught China flatfooted. The American reactions have been covered to death for the past two days, so I won't go futher. Instead, more indicative of how large this victory is, is how third parties have taken the news. Across the board in Europe, there is a morbid acceptance that their continent has zero relevance to the world now, outside of handbags and cathedrals. They may have been at the forefront of technology for 500 years and even had a decent run in the 2000s, but in this current battle they're not even a player. And yes, even India, where this tweet sums up their reaction better than I ever could.