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DeepSeek AI

DeepSeek AI, a Chinese startup founded in 2023, has rapidly disrupted the AI market with its cost-efficient, open-source models and innovative technology, including a Mixture-of-Experts system that significantly reduces computational costs. The company has gained market traction by offering low-cost APIs and achieving high download numbers for its AI assistant, leading to notable impacts on competitors and the tech stock market. DeepSeek's success highlights the intensifying U.S.-China AI competition and showcases China's advancements in resource-efficient AI development.

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245 views2 pages

DeepSeek AI

DeepSeek AI, a Chinese startup founded in 2023, has rapidly disrupted the AI market with its cost-efficient, open-source models and innovative technology, including a Mixture-of-Experts system that significantly reduces computational costs. The company has gained market traction by offering low-cost APIs and achieving high download numbers for its AI assistant, leading to notable impacts on competitors and the tech stock market. DeepSeek's success highlights the intensifying U.S.-China AI competition and showcases China's advancements in resource-efficient AI development.

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DeepSeek AI

DeepSeek AI, a Chinese startup founded in 2023, has rapidly emerged as a disruptive force in the global AI
landscape. Backed by quant hedge fund High-Flyer and led by CEO Liang Wenfeng, the company has challenged
established players like ChatGPT with its cost-efficient, open-source models and strategic technical innovations.

 Core Technology and Architecture

Mixture-of-Experts (MoE) System:

DeepSeek’s models use an MoE architecture that activates only 37 billion of their 671 billion total parameters per
task, reducing computational costs by 95% compared to conventional models. This selective activation enables high
efficiency without sacrificing performance.

Key Models:

- DeepSeek-V3: A general-purpose model for tasks like content generation and coding.

- DeepSeek-R1: Specializes in complex reasoning and problem-solving, outperforming similar models in math and
logic tasks.

The company’s models leverage inference-time computing, optimizing resource use by activating only relevant
neural pathways for each query.

 Strategic Advantages

- Cost Efficiency: Trained for under $6 million using Nvidia H800 chips, compared to billions spent by U.S. rivals.

- Open-Source Access: Models are released under the MIT License, allowing free modification and commercial use.

- Hardware Stockpile: Pre-sanction stockpiling of 10,000–50,000 Nvidia A100 GPUs provided a critical competitive
edge.

 Market Impact

- App Store Dominance: Its free AI assistant topped U.S. iOS downloads within weeks of launch, surpassing ChatGPT.

- Financial Ripples: Caused a 12.5% drop in Nvidia shares and broader tech stock declines as investors reassessed AI
infrastructure valuations.

- Price Wars: Triggered a 50–90% price reduction among Chinese tech giants like Tencent and Alibaba, earning the
nickname “Pinduoduo of AI”[3][12].

### Business Model and Regulation

- **Revenue Strategy**: Profitable despite free user access, relying on low-cost APIs (1/30th of ChatGPT’s pricing)
and avoiding consumer-facing services that would trigger strict Chinese AI regulations[3][12].
- **Talent Acquisition**: Focuses on recruiting recent graduates and non-CS professionals to diversify model
capabilities[3][6].

### Global Implications

DeepSeek’s rise has intensified U.S.-China AI competition, with Marc Andreessen calling it “one of the most
remarkable breakthroughs” in the field[4][5]. While skeptics question its enterprise adoption in Western markets, its
technical achievements underscore China’s growing prowess in constrained-resource AI development[2][5][8].

The company’s success demonstrates how algorithmic innovation and strategic resource management can disrupt
capital-intensive AI paradigms, potentially reshaping global tech economics.

Citations:

[1] https://upstox.com/news/market-news/latest-updates/things-to-know-about-deep-seek-that-shook-us-tech-
stocks/article-142709/

[2] https://www.pbs.org/newshour/science/what-is-deepseek-heres-a-quick-guide-to-the-chinese-ai-company

[3] https://en.wikipedia.org/wiki/DeepSeek_AI

[4] https://www.bbc.com/news/articles/c5yv5976z9po

[5] https://www.cbsnews.com/news/what-is-deepseek-ai-china-stock-nvidia-nvda-asml/

[6] https://www.hashstudioz.com/blog/what-is-deepseek-ai-the-model-shaking-up-chatgpt-nvidia-and-the-ai-world/

[7] https://daily.dev/blog/deepseek-everything-you-need-to-know-about-this-new-llm-in-one-place

[8] https://opencv.org/blog/deepseek/

[9] https://www.sydney.edu.au/news-opinion/news/2025/01/29/deepseek-ai-china-us-tech.html

[10] https://www.youtube.com/watch?v=gY4Z-9QlZ64

[11] https://edition.cnn.com/2025/01/27/tech/deepseek-stocks-ai-china/index.html

[12] https://www.studyiq.com/articles/deep-seek-ai/

--- Research by Bhaskar Kumar

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