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DeepSeek AI Disruption Shakes Global Markets

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DeepSeek AI Disruption Shakes Global Markets

DeepSeek AI Disruption Shakes Global Markets


It has been widely accepted in the AI industry that building state-of-the-art large language models is a capital-intensive and skill-demanding activity. This is part of the justification for the U.S. government’s commitment to fund the $500 billion Stargate Project that President Donald Trump announced.

This perception, however, has been changed by the Chinese AI developer DeepSeek. On January 20, 2025, DeepSeek launched its proprietary R1 LLM with unprecedentedly low expenditures compared to what other vendors spent for their R1 models. Additionally, DeepSeek Ai is also licensing its R1 models under an open-source framework which permits their unrestricted use.

 

What is DeepSeek?

DeepSeek is a Hangzhou-based AI development company. The company was founded in May 2023 by Liang Wenfeng, a Zhejiang University alumnus. Wenfeng is also the co-founder of High-Flyer, a quantitative international hedge fund that owns Deep Seek. At the moment, DeepSeek operates as an independent AI research lab under the High-Flyer banner. DeepSeek’s total funding and valuation have not been disclosed, but some information is available depending on the source.

The company services its models through a web interface, a mobile application, and API access.

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Comparison Between OpenAI vs. DeepSeek

Both companies have generative AI LLMs under development, however, their methods differ.

OpenAI, incorporated in 2015 and based in San Francisco, California, aims to generalize broad AI capabilities. It has made models such as GPT-4o and o1 and specializes in image generation and speech recognition with DALL-E and Whisper, respectively. With regards to API pricing, OpenAI charges $15 per million input tokens and $60 per million output tokens for o1, which has a very limited open-source policy. The company incorporates supervised and instruction-based fine-tuning for training. The estimated development cost for o1 is in the hundreds of millions of dollars.

By contrast, DeepSeek was founded in 2023 and is headquartered in Hangzhou, China. DeepSeek AI places a focus on efficiency and open-source models. Its key models are DeepSeek-V3, and DeepSeek-R1, and specialty models include DeepSeek Coder and Janus Pro for coding and vision applications respectively. DeepSeek also offers API through for DeepSeek- R1 but at significantly lower pricing of $0.55/ million input and $2.19/million output. Unlike OpenAI, DeepSeek has a restively open-source policy and uses reinforcement learning for training. Moreover, the company claims the development cost for DeepSeek-R1 was below $6 million, making it a cheaper alternative.

 

Innovations Related To Training In DeepSeek

DeepSeek AI approaches the training of its R1 models differently from OpenAI’s methodology. The process took less time, required fewer AI accelerators, and was cheaper to produce. DeepSeek works towards achieving artificial general intelligence, and the company’s progress is considered a large step forward for a more advanced AI developed in the future.

DeepSeek AI provides clear details on the various innovations that were incorporated into the R1 model in their research paper. Some of these innovations include:

  • Reinforcement learning: DeepSeek streamlined the entire reasoning process through large-scale reinforcements.
  • Reward engineering: The researchers created a rule-based incentive system for the model that surpassed neural reward models frequently placed outperforming. Reward engineering refers to designing a system of incentives that control the AI model during training.
  • Distillation: DeepSeek researchers were able to condense abilities into models as small as 1.5 billion params by using advanced knowledge transfer methods.
  • Emergent behavior network: The most innovative aspect is emergent behavior, which is the phenomenon of having complex reasoning patterns built entirely from reinforcement learning without being programmed. 

Why It’s Causing Concern in the U.S.

 DeepSeek AI is raising alarms in the U.S. for several reasons, including the following:

  • Cost Disruption: DeepSeek states that it developed its R1 model for less than $6 Million. Compared to OpenAI, DeepSeek AI is also more cost-effective for users.
  • Technical Achievement Despite Restrictions: The export of the highest-performance AI accelerator and GPU chips from the US to China is restricted. However, DeepSeek has proven that cutting-edge AI development can be achieved without the most sophisticated US technology.
  • Business Model Threat: Unlike OpenAI, which is proprietary technology, DeepSeek AI is open source and free. Such moves jeopardize the revenue model of US companies that charge monthly fees for AI services.
  • Geopolitical Concerns: These factors enable DeepSeek, a company based in China, to contest US technological superiority in AI. Tech investor Marc Andreessen referred to this as AI’s “Sputnik moment,” referring to the Soviet Union’s mid-century space race advancement.

To Conclude,

DeepSeek has completely revolutionized the industry by demonstrating a fraction of what is possible. With their use of open-source policies alongside reinforcement learning and efficient training methods, it is no wonder that they pose a challenge to giants like OpenAI. Their rapid growth, even with chip restrictions, raises other concerns such as cost disruption and global AI leadership. While DeepSeek AI sets out to expand the new frontier of Artificial Intelligence, the world will witness how their presence deepens the geopolitical landscape.

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