By Teghan O'Connell
On January 20th 2025 [1], DeepSeek launched their most recent AI model. The program, R1, is a language and culture-based program similar to OpenAI’s Chat GPT. DeepSeek is a small startup company in China, owned by Lian Wenfeng, who’s hedge fund is funding the company. DeepSeek is primarily made up of young, recent graduates who lack workplace experience, but have technological expertise instead. These employees are able to provide a fresh look into the world of AI. Since DeepSeek’s founding, the company has published three AI models. The important ones are the second and third models. The second, V3, caused a shakeup in Chinese markets, as other Chinese tech companies move towards competitive pricing following V3’s release in December 2024. The third model, R1, caused a huge dip in the US stock market on Monday, January 27th, 2025, following its launch on January 20th.[2]
Why is the new model, R1, so disruptive?
The launch of R1 caused US tech investors to sell their stock in AI chip producing company Nvidia at large rates. A rush to sell caused Nvidia’s stock to fall 12% by January 27th, 2025, culminating in a loss of $600 billion of market value, the largest stock loss in recent history. The previous record was $240 billion lost by Meta in February 2022. [3] The rapid sales were caused by how DeepSeek was able to get their systems on and ready to run. Since the Biden administration has restricted the sale of advanced AI chips (produced by Nvidia) to companies in China, these Chinese companies haven't had access to the top-of-the-line technology that US tech companies have.[4] However, in a shocking announcement DeepSeek noted an ability to power their base model at a cost of only $5.6 million. The company doesn’t disclose the cost to train their model, however the minimal start-up costs alone caused damage to the US stock market. Tech companies in the United States are spending billions to power their models. OpenAI CEO Sam Altman has stated trillions of dollars would be needed to keep moving forward with AI advancements. [5] Deep Seek’s R1 model’s ability to keep up with the top US models with less advanced components at a fraction of the cost (if the numbers are accurate) poses a large risk to US tech companies.
How will DeepSeek and its R1 model affect the future of AI?
The future of AI is unclear following the release of the R1 model. Deepseek is revolutionizing access to advanced softwares. The DeepSeek app is free and has been at the top of the Apple IOS app charts since the R1 model debuted. [6] Researchers in the tech field believe the debut of DeepSeek will cause US companies to take a shift towards more innovative and sustainable approaches to development. DeepSeek itself might not have much of a future in the US. DeepSeek, since being based in China, is subject to censorship and control by the Chinese Communist Party. This connection could lead to similar concerns to those we have seen with TikTok.[7] Other companies are already attempting to replicate R1’s open-source training model, but we will have to wait and see if they are successful.
[1] Fireworks AI Team, DeepSeek R1: All you need to know, Fireworks AI (Jan. 24, 2025), https://fireworks.ai/blog/deepseek-r1-deepdive
[2] Janakiram MSV, All about DeepSeek- the Chinese AI startup challenging US Big Tech, Forbes (Jan. 27, 2025, 1:01 PM), https://www.forbes.com/sites/janakirammsv/2025/01/26/all-about-deepseekthe-chinese-ai-startup-challenging-the-us-big-tech/
[3] David Goldman and Matt Egan, A shocking Chinese AI advancement called DeepSeek is sending US stocks plunging, CNN (Jan. 27, 2025, 4:21 PM), https://www.cnn.com/2025/01/27/tech/deepseek-stocks-ai-china/index.html
[4] Billy Perrigo, Why Biden is rushing to restrict AI chip exports, Time (Jan. 14, 2025, 11:30 AM), https://time.com/7206500/biden-ai-chip-export-restrictions/
[5] David Goldman, What is DeepSeek, the Chinese AI startup that shook the tech world?, CNN Business (Jan. 27, 2025, 4:55 PM), https://www.cnn.com/2025/01/27/tech/deepseek-ai-explainer/index.html
[6] Eduardo Baptista, What is DeepSeek and why is it disrupting the AI sector?, Reuters (Jan. 28, 2025, 12:13 PM), https://www.reuters.com/technology/artificial-intelligence/what-is-deepseek-why-is-it-disrupting-ai-sector-2025-01-27/
[7] Leila Fadel, Is the Chinese company DeepSeek an existential threat to America’s AI Industry?, npr (Jan. 28, 2025, 4:22 AM), https://www.npr.org/2025/01/28/nx-s1-5276170/is-the-chinese-company-deepseek-an-existential-threat-to-americas-ai-industry