DeepSeek Explained: China’s Answer to OpenAI That’s Disrupting Markets

The world of artificial intelligence (AI) has experienced a major shake-up with the arrival of DeepSeek. This Chinese AI startup has quickly become a major player, challenging the dominance of Western companies like OpenAI and Google. DeepSeek’s rise is not just about technology — it’s also about cost-efficiency, global influence, and the changing balance of power in the tech world. Let us look at DeepSeek’s journey, innovations, and the bigger picture of what its success means.

The Launch of DeepSeek: From Small Beginnings to Global Impact

DeepSeek was founded in 2023 by Liang Wenfeng, a former hedge fund manager and a graduate of Zhejiang University in electronic engineering. Liang’s experience leading a hedge fund called High-Flyer gave him valuable insight into using AI to solve complex problems. What started as a small project with $1.4 million in funding quickly grew into a global phenomenon.

In late 2024, DeepSeek released its first major AI model, DeepSeek-V3. At the time, most people were still focused on big names like OpenAI and Google. But DeepSeek quietly showed the world that it could create advanced AI at a fraction of the cost. By January 2025, DeepSeek released its next model, DeepSeek-R1, which performed better than many competitors in tasks like reasoning, coding, and solving problems.

Innovations and Features: What Makes DeepSeek Special

DeepSeek stands out for several reasons, including its advanced technology, lower costs, and commitment to sharing its work openly. Here are the key highlights:

• Mixture-of-Experts (MoE) Design: DeepSeek’s AI uses a unique system called Mixture-of-Experts. This means it activates specific parts of its system, or “experts,” only when they’re needed for a task. This makes the AI faster and more efficient while still delivering excellent results.
• Open Source: Unlike many companies that keep their AI models private, DeepSeek makes its systems, like DeepSeek-R1, available for free under the MIT license. This allows developers and businesses around the world to use and improve the technology, encouraging innovation and making AI more accessible.
• Cost Efficiency: DeepSeek’s models are much cheaper to create compared to competitors. For example, while OpenAI spends hundreds of millions of dollars to train models, DeepSeek developed R1 with just $6 million.
• Less Hardware Needed: DeepSeek’s models were trained using fewer than 2,000 Nvidia GPUs. In contrast, U.S. companies often use tens of thousands of GPUs. This shows how effective DeepSeek’s optimization techniques are and how it is finding ways to work around U.S. restrictions on advanced chips.

DeepSeek-R1 has performed exceptionally well in global tests, such as scoring 79.8% on AIME 2024, 97.3% on MATH-500, and ranking in the 96.3rd percentile on Codeforces for coding challenges.

Why DeepSeek Stands Out

DeepSeek’s open-source approach makes it accessible to more people, including startups, researchers, and companies that may not have the budget for expensive AI systems. This contrasts with proprietary models like OpenAI’s, which are often locked behind high paywalls.

Its focus on efficiency also proves that cutting-edge AI doesn’t need the most expensive hardware. This makes it possible for smaller businesses and even governments with limited resources to participate in AI development. Additionally, DeepSeek isn’t just good on paper. It performs well in practical tasks like coding, creative writing, and solving real-world problems, demonstrating a level of intelligence that feels very human-like.

How DeepSeek is Disrupting Markets

DeepSeek’s rapid rise has shaken the global tech market. When DeepSeek-R1 was announced, major U.S. tech stocks dropped. Nvidia’s stock fell by 12.5%, while Microsoft and Alphabet saw declines of 6% and 3.7%, respectively. This reaction came as investors realized that massive investments in AI infrastructure might not be as essential as previously thought.

DeepSeek’s lower prices have also forced competitors to rethink their pricing strategies. For example, OpenAI charges $7.50 per million tokens for its API, but DeepSeek offers the same service for just $0.14. This pricing difference could significantly change the AI market.

The AI Bubble and the Billionaire Battle

In recent years, huge amounts of money have been poured into AI startups and infrastructure, creating what some call an “AI bubble.” DeepSeek’s cost-efficient approach has led many to question whether these high valuations are sustainable.

At the same time, American billionaires like Elon Musk and Peter Thiel have been investing heavily in AI to maintain control over this transformative technology. The U.S. government has also launched initiatives like the $100 billion Stargate program to boost AI development. However, critics argue that programs like Stargate mainly benefit large tech companies and fail to make AI accessible to everyone. DeepSeek, on the other hand, shows that groundbreaking innovation can come from outside these elite circles.

The Bigger Picture: China vs. the U.S.

Despite U.S. restrictions on technology exports, China has shown incredible resilience. For instance, Huawei developed the Kirin 9000s chipset for its Mate 60 Pro smartphone using domestic resources. Similarly, Chinese AI companies like DeepSeek have achieved remarkable results without relying on the latest chips. They focus on smart software solutions and creative architectures to push AI forward.

China’s ability to overcome these challenges reflects its broader goal of becoming self-sufficient in technology and leading in global innovation.

Challenges for DeepSeek

DeepSeek’s rise hasn’t been without difficulties. Here are some challenges it faces:

• Avoiding Sensitive Topics: DeepSeek’s models avoid politically sensitive issues, such as the Tiananmen Square protests or territorial disputes. While this approach helps avoid controversy, it limits the model’s usefulness for researchers and journalists who need unbiased tools for open discussions.
• Scalability Issues: DeepSeek’s sudden popularity has led to system outages, showing that it needs more infrastructure to handle its growing user base.
• Ethical Risks: Making advanced AI open-source has its risks. Malicious actors could misuse the technology for harmful purposes, like creating fake news, deepfakes, or surveillance tools. Without clear international rules, these risks could grow.

The Future of AI: Opportunities and Challenges

DeepSeek’s low costs and efficiency could make advanced AI accessible to a wide range of industries. For example, Apple, which uses ChatGPT for some of its features, might consider switching to DeepSeek to reduce costs. Similarly, Android phone makers who use Google’s Gemini AI might look to DeepSeek for better pricing.

DeepSeek’s success is a sign that the balance of power in AI is shifting. With open-source AI leading the way, innovation could become more collaborative and widespread. However, this also means that governments and organizations must work together to set rules that prevent misuse and promote ethical AI use.

Conclusion

DeepSeek’s rise represents a turning point in the AI industry. It proves that cutting-edge AI can be affordable and widely accessible, challenging the dominance of Western tech giants and reshaping global markets. As the race to lead in AI heats up, DeepSeek’s innovations offer both opportunities and challenges, making it clear that thoughtful regulation will be essential in this new era of technology.