DeepSeek upended the global AI industry, following its release of two powerful open-source AI models, V3 and R1, which were developed at a fraction of the cost and computing power typically required by major tech companies to build large language models (LLMs), the technology underpinning generative AI services like ChatGPT.
Open source gives public access to a program’s source code, allowing third-party software developers to modify or share its design, fix broken links or scale up its capabilities.
DeepSeek’s more cost-efficient development of powerful models, compared with what bigger tech companies spend, also shows how far Chinese AI firms have progressed, despite US sanctions that have largely blocked their access to advanced semiconductors used for training LLMs.
DeepSeek’s efficient development strategy also raised questions about the valuation of major AI players like chip supplier Nvidia and the need for massive tech infrastructure investments such as the US$500 billion Stargate Project.
Since US start-up OpenAI released ChatGPT and ushered in a new AI era, the field has been developing quickly. DeepSeek showed the world a means to build AI systems at a low cost. Since [DeepSeek’s AI models] are open source, they’ll be able to benefit the global AI community by having all of us advance the technology together.
DeepSeek’s breakthrough has sparked a rush among local companies from advanced manufacturing sectors to internet services to adopt the start-up’s low-cost, high-performance AI models. Personal computer giant Lenovo Group, Shenzhen-based robotics firm UBTech and electric vehicle maker Geely were among the first to integrate DeepSeek’s models into their products in recent weeks.
What is DeepSeek and why is it disrupting the AI sector?
Chinese startup DeepSeek's launch of its latest AI models, which it says are on a par or better than industry-leading models in the United States at a fraction of the cost, is threatening to upset the technology world order. The company has attracted attention in global AI circles after writing in a paper last month that the training of DeepSeek-V3 required less than $6 million worth of computing power from Nvidia H800 chips. DeepSeek's AI Assistant, powered by DeepSeek-V3, has overtaken rival ChatGPT to become the top-rated free application available on Apple's App Store in the United States. This has raised doubts about the reasoning behind some U.S. tech companies' decision to pledge billions of dollars in AI investment and shares of several big tech players, including Nvidia, have been hit.
The release of OpenAI's ChatGPT in late 2022 caused a scramble among Chinese tech firms, who rushed to create their own chatbots powered by artificial intelligence. But after the release of the first Chinese ChatGPT equivalent, made by search engine giant Baidu (9888.HK), opens new tab, there was widespread disappointment in China at the gap in AI capabilities between U.S. and Chinese firms. The quality and cost efficiency of DeepSeek's models have flipped this narrative on its head. The two models that have been showered with praise by Silicon Valley executives and U.S. tech company engineers alike, DeepSeek-V3 and DeepSeek-R1, are on par with OpenAI and Meta's most advanced models, the Chinese startup has said. They are also cheaper to use. The DeepSeek-R1, released last week, is 20 to 50 times cheaper to use than OpenAI o1 model, depending on the task, according to a post on DeepSeek's official WeChat account.
DeepSeek is a Hangzhou-based startup whose controlling shareholder is Liang Wenfeng, co-founder of quantitative hedge fund High-Flyer, based on Chinese corporate records. Liang's fund announced in March 2023 on its official WeChat account that it was "starting again", going beyond trading to concentrate resources on creating a "new and independent research group, to explore the essence of AGI" (Artificial General Intelligence). DeepSeek was created later that year. ChatGPT makers OpenAI define AGI as autonomous systems that surpass humans in most economically valuable tasks. It is unclear how much High-Flyer has invested in DeepSeek. High-Flyer has an office located in the same building as DeepSeek, and it also owns patents related to chip clusters used to train AI models, according to Chinese corporate records. High-Flyer's AI unit said on its official WeChat account in July 2022 that it owns and operates a cluster of 10,000 A100 chips.
J. Michael Dennis
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