ChatGPT maker OpenAI CEO Sam Altman has welcomed the competition from Chinese-based low-cost artificial intelligence (AI) model DeepSeek.
DeepSeek is a Chinese AI start-up that recently made strides in the AI sector with the development of its DeepSeek-R1 language model.
This model has garnered attention for its performance and cost-effectiveness, challenging established players like OpenAI’s ChatGPT.
Launched in December 2024, DeepSeek-R1 is an open source language model that reportedly matches the capabilities of leading AI models at a fraction of the cost. It has quickly become the top free app in the US Apple Store, surpassing ChatGPT.
DeepSeek claims its model is 20 to 50 times cheaper to use than OpenAI’s o1 model, depending on the task.
The Chinese tech start-up’s advancements in AI modelling represent a significant development in the global AI landscape, offering a cost-effective and transparent alternative to existing models.
US tech stocks on Monday tanked after DeepSeek last week released the R1 model to the public.
Reuters reports that shares of Nvidia, the poster child of the AI boom in recent years, dragged US stocks lower, sinking 17% on Monday and wiping $593 billion from the chipmaker’s market value − a record one-day loss for any company.
It adds that Japanese technology shares fell on Tuesday, as the global market rout sparked by the emergence of the low-cost Chinese AI model entered day two, with investors questioning the sky-high valuation and dominance of AI bellwethers.
This, after the Chinese start-up said it had invested $5.6 million in computing power for the model, compared with the hundreds of billions of dollars US companies spend on their AI technologies.
Last week, US president Donald Trump announced Stargate, a $500 billion new AI investment company led by tech firms SoftBank, OpenAI and Oracle.
The launch of Stargate came as global superpowers race to take the lead in AI-based innovations.
Knock-on consequences
Taking to social media after the DeepSeek frenzy, Altman says: “DeepSeek’s R1 is an impressive model, particularly around what they’re able to deliver for the price. We will obviously deliver much better models and also, it’s legit invigorating to have a new competitor. We will pull up some releases.
“But mostly, we are excited to continue to execute on our research roadmap and believe more compute is more important now than ever before to succeed at our mission. The world is going to want to use a lot of AI and really be quite amazed by the next-gen models coming. Look forward to bringing you all AGI [artificial generative intelligence] and beyond.”
Sebastian Pfeiffer, MD of ImpossibleCloud Network, says: “The news China is launching its own AI tool – DeepSeek –which is reportedly cheaper and uses less data than OpenAI’s ChatGPT product,is a testament to how fast this industry is moving and how aggressivecompetition will get.
“Last month, DeepSeek reportedly ran a test that showed its version three language model outperformed those of OpenAI for a relatively minuscule development budget. Additionally, DeepSeek will charge users significantly less – just $2.20 per million tokens, compared to $198 at OpenAI for the same usage.”
Pfeiffer adds that the market has responded aggressively, with futures for US tech stocks down significantly, while Tesla, Amazon and Meta fell more than 2% in early European trading, as investors are now questioning whether these expensive US tech stocks are overvalued.
“It seems clear we are now in an aggressive AI arms race. What is not being considered enough, though, is the cloud storage capacity we are going to need to facilitate this AI revolution,” he notes.
“Right now, the entire internet is effectively stored between a handful of companies – and these centralised cloud solutions are simply not fit for purpose when it comes to the AI future. It is only decentralised cloud solutions that can handle the enormous processing that this new digital revolution is going to need.”
Inexpensive option
Says Charles Wayn, co-founder of Web3 infrastructure and digital credential network Galxe: “Considering the recent announcements we’ve seen from the US regarding huge investment in the AI sector, perhaps one or two people knew the announcement regarding DeepSeek was coming.
“Nonetheless, markets have reacted aggressively to the news that China has launched a cheaper and reportedly better version of ChatGPT, while TikTok owner ByteDance has also entered the fray with Doubao-1.5-pro, which it claims is superior to its American rival. Both are significantly cheaper than ChatGPT – DeepSeek, for example, charges $2.20 for every million tokens of data, compared to $198 at OpenAI.”
According to Wayn, while this is bad news for investors in US tech stocks, it’s not bad news for the crypto industry.
“Yes, we’ve seen a slide in crypto tokens today but it won’t last as crypto is the biggest beneficiary of AI technology.
“Whether that be AI co-pilots like Alva that can help investors research different digital assets, AI that can assist developers to make faster, more efficient advancements in blockchain technology, or AI agents that can fully manage portfolios, the possibilities are endless. So, no matter where this technology comes from, the crypto sector will benefit from it.”
Meanwhile, DeepSeek said on Monday it is temporarily limiting registrations due to a large-scale malicious attack on its services.
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