DeepSeek, a Chinese AI startup, has sent shockwaves through Silicon Valley with its new AI model, DeepSeek-R1. The model reportedly matches the performance of leading American AI models at a fraction of the cost. DeepSeek claims to have achieved this by using clever engineering to substitute for raw computing power.
Jevons paradox strikes again! As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can't get enough of. https://t.co/omEcOPhdIz
— Satya Nadella (@satyanadella) January 27, 2025
The company says it built R1 using a modest number of second-rate AI chips. Initially, many industry watchers reacted with disbelief. They thought DeepSeek may have cheated, fudged numbers, or that the Chinese government was promoting propaganda.
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.
— Sam Altman (@sama) January 28, 2025
Some suspected DeepSeek was using banned chips or that R1 was just a re-skinning of American AI models. However, as more people examined the open-source software of DeepSeek-R1, skepticism turned to worry.
DeepSeek’s bold move shakes industry
DeepSeek is a really good model, but it is not generally a better model than o1 or Claude.
But since it is both free & getting a ton of attention, I think a lot of people who were using free “mini” models are being exposed to what a early 2025 reasoner AI can do & are surprised
— Ethan Mollick (@emollick) January 28, 2025
When the DeepSeek mobile app hit number one on the App Store, it tipped into full-blown panic. The breakthrough has upended several fundamental assumptions about AI progress. It suggests that China, thought to be in a distant second place, may be catching up faster than expected.
The implications are far-reaching. It could mean that the current approach of American tech giants, which relies heavily on expensive hardware and massive computing power, may not be the only path to AI dominance. As one researcher put it, “If what DeepSeek is claiming is true, it means we’ve been doing it wrong.
We’ve been brute-forcing our way to better AI, when we should have been focusing on efficiency and clever design.”
The news has sent tech stocks tumbling, with investors worried that American companies may have overinvested in an arms race that China is now winning through smarter engineering. For now, the full implications of DeepSeek’s breakthrough remain to be seen. But one thing is clear: the global AI landscape has shifted, and Silicon Valley is scrambling to catch up.
