DeepSeek, a Chinese AI startup based in Hangzhou, has shaken the global tech industry by unveiling DeepSeek-R1, an artificial intelligence model rivaling the capabilities of leading players like OpenAI and Google.

Axar.az,the company, founded in 2023 by entrepreneur Liang Wenfeng, managed to develop its model using just $6 million and less advanced Nvidia H800 chips, challenging the assumption that cutting-edge AI requires billions of dollars in resources. DeepSeek’s success highlights the effectiveness of resourceful innovation, raising questions about U.S. dominance in AI and the impact of export restrictions on advanced chips.
DeepSeek-R1’s development contrasts sharply with the strategies of U.S. tech giants like OpenAI, which have relied on massive investments in high-end computing power. The startup utilized a collaborative approach by combining multiple specialized models to optimize slower chips for efficient data analysis. Liang emphasized that innovation, rather than unlimited resources, was key to the breakthrough, suggesting that human-like artificial general intelligence (AGI) could emerge from language-based models.

The announcement sent ripples through global markets, with Nvidia losing $600 billion in market capitalization as its stock fell 17%. Google’s parent companies Alphabet and Microsoft also experienced notable declines in stock prices. While the U.S. government has restricted the export of advanced GPUs to China, DeepSeek demonstrated that effective AI development is possible even with less sophisticated hardware. The company stockpiled 10,000 Nvidia A100 GPUs before the export bans, ensuring it could advance its AI capabilities despite restrictions.

DeepSeek’s decision to release its model for free has drawn attention, contrasting with OpenAI’s approach of paywalling its most advanced models. This accessibility has fueled perceptions of a leap in AI capabilities, though some experts argue that U.S. companies have already achieved similar advancements behind paywalls. OpenAI CEO Sam Altman acknowledged DeepSeek’s success but reaffirmed his company’s commitment to scaling up computational power for future breakthroughs.

The emergence of DeepSeek underscores the shifting dynamics in global AI development, with China proving its ability to rival Silicon Valley. Experts believe that DeepSeek’s resourceful innovation demonstrates the potential of necessity-driven progress, challenging the U.S. to focus on boosting its own tech ecosystem rather than solely relying on restricting China’s access to cutting-edge technologies.