A new Chinese AI model that is surprisingly effective and powerful has caused a frenzy in the tech industry. Wall Street is experiencing anxiety regarding DeepSeek R1.
DeepSeek, a startup that was established just one year ago, has achieved a breakthrough that Marc Andreessen, a renowned tech investor, has dubbed “AI’s Sputnik moment.”
The new AI model, R1, is capable of nearly matching the capabilities of its more renowned competitors, such as OpenAI’s GPT-4, Meta’s Llama, and Google’s Gemini, at a little portion of the cost.
In stark contrast to the hundreds of millions, if not billions, of dollars that US companies invest in their AI technology, the company claimed to have spent only $5.6 million on the basis of its AI model. This is even more remarkable when considered in the context of the United States’ years-long efforts to restrict China’s access to powerful AI chips in response to national security concerns. This would suggest that DeepSeek implemented its low-cost model on AI chips that were not particularly powerful.
The company, founded in late 2023 by Chinese hedge fund manager Liang Wenfeng, is one of many startups competing for large investments to ride the AI wave that has swept the tech industry to unprecedented heights.
R1, which was unveiled late last year, was launched last week and garnered substantial attention this week when the company disclosed its astonishingly low cost of operation to the Journal. In addition, the model is open-source, which allows other organizations to enhance it through testing and development.
Nearly 2 million people have downloaded the DeepSeek application, which has significantly grown in the app store charts, surpassing ChatGPT Monday.
The most influential tech executives in the United States are acquiring nuclear power companies to supply their AI models with the electricity they need, given the fact that AI is an expensive and power-hungry technology.
Meta announced last week that it would spend over $65 billion on AI development this year. Last year, OpenAI CEO Sam Altman said the AI industry would need trillions of dollars to develop high-demand chips for electricity-hungry data centers.
The idea that less capable chips can achieve similar capabilities as America’s most powerful AI models for a small fraction of the cost represents a significant shift in the industry’s perception of the necessary investment in AI.
A co-founder of the Silicon Valley venture capital firm Andreessen Horowitz and a Trump supporter, Andreessen ranked DeepSeek as “one of the most amazing and impressive breakthroughs I’ve ever seen” in an X post.
