DeepSeek’s Rapid Rise to AI Stardom:
DeepSeek, a Chinese AI lab, recently surged to the top of the Apple App Store charts, capturing global attention. Its innovative, compute-efficient AI models have sparked concerns among Wall Street analysts and technologists about the U.S.’s ability to maintain its lead in the AI race and the future demand for AI chips.
Origins of DeepSeek
DeepSeek is backed by High-Flyer Capital Management, a Chinese quantitative hedge fund founded in 2015 by AI enthusiast Liang Wenfeng. In 2023, High-Flyer launched DeepSeek as a separate AI lab, which later became an independent company. DeepSeek initially focused on building its own data center clusters for AI model training, despite facing U.S. export bans on high-end hardware.
Breakthrough Models
DeepSeek introduced its first set of models—DeepSeek Coder, DeepSeek LLM, and DeepSeek Chat—in late 2023. However, it was the launch of its next-gen DeepSeek-V2 models in spring 2024 that gained significant attention. The DeepSeek-V2 system performed well in AI benchmarks and was more cost-effective than similar models, prompting competitors like ByteDance and Alibaba to reduce their prices.
In December 2024, DeepSeek launched its DeepSeek-V3 models, which outperformed other open and closed models, including Meta’s Llama and OpenAI’s GPT-4. In January 2025, the company released R1, a reasoning model comparable to OpenAI’s GPT-4, offering more reliable performance in complex fields like physics, science, and math.
Challenges and Limitations
Despite its success, DeepSeek faces challenges due to its Chinese origins. Its models are subject to regulation by China’s internet authorities, limiting the scope of its responses on sensitive topics like Tiananmen Square and Taiwan.
Business Model and Disruption
DeepSeek’s business model remains unclear, but the company’s ability to offer its services at extremely competitive prices has made it popular with developers. Its models are available under permissive licenses, enabling commercial use, and over 500 derivative models have been created by developers. DeepSeek’s success has disrupted the AI landscape, causing stock declines for rivals like Nvidia and prompting reactions from industry leaders like OpenAI’s Sam Altman.
Future Outlook
While DeepSeek’s models are improving, the future remains uncertain, with the U.S. government wary of the company’s growing influence in the AI sector.
