[A surprisingly efficient and powerful Chinese AI model has taken the technology industry by storm. Called DeepSeek R1, it’s been able to match the capabilities of its more famous rivals, including OpenAI’s GPT-4, Meta’s Llama, and Google’s Gemini, but at a fraction of the cost. The company has spent just $5.6 million powering its base AI model, compared to the hundreds of millions, if not billions, of dollars spent by US companies.
The company’s founder, Liang Wenfeng, has become the Sam Altman of China, an evangelist for AI technology and investment in new research. DeepSeek has released various competitive AI models over the past year, but its V3 model raised concerns about content restrictions around sensitive topics about the Chinese government and its leadership, casting doubts on its viability as an industry competitor.
However, R1, which was released late last year, has gained significant attention this week after the company revealed its shockingly low cost of operation. The model is open-source, which means other companies can test and build upon it to improve it. The DeepSeek app has surged on the app store charts, surpassing ChatGPT, and has been downloaded nearly 2 million times.
The low cost of operation is significant, as AI is a power-hungry and cost-intensive technology. The US’s most powerful tech leaders are buying up nuclear power companies to provide the necessary electricity for their AI models. Meta has said it will spend up to $65 billion this year on AI development, while Sam Altman, CEO of OpenAI, has said the AI industry will need trillions of dollars in investment to support the development of high-demand chips needed to power the sector’s complex models.
The success of DeepSeek has rattled nerves on Wall Street, with US stocks set for a steep selloff Monday morning. Nvidia, Meta, and Alphabet, Google’s parent company, were all down sharply, as were many other tech giants. The industry is taking the company at its word that the cost was so low, but some question the truthfulness of a single and relatively unknown company.
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