The day after Christmas, a small Chinese startup called DeepSeek unveiled a new AI system that could rival the capabilities of advanced chatbots from companies like OpenAI and Google.
That alone would have been a milestone. But the team behind the system, called DeepSeek-V3, described an even bigger step. In a research paper explaining how they built the technology, DeepSeek engineers said they used only a fraction of the highly specialized computer chips that leading AI companies relied on to train their systems.
These chips are at the center of a tense technological competition between the United States and China. As the U.S. government works to maintain the country's leading position in the global AI race, it is trying to reduce the number of powerful chips, such as those made by Silicon Valley company Nvidia, that can be sold to China and other rivals. to limit.
But the performance of the DeepSeek model raises questions about the unintended consequences of the US government's trade restrictions. The controls have forced researchers in China to get creative with a wide range of tools available for free on the Internet.
The DeepSeek chatbot answered questions, solved logic problems and wrote its own computer programs, as capable as anything already on the market, according to benchmark tests that US AI companies have used.
And it was made cheaply, challenging the prevailing idea that only the largest companies in the technology sector – all based in the United States – could afford to create the most advanced AI systems. The Chinese engineers said they only needed about $6 million in raw computing power to build their new system. That's about ten times less than the tech giant Meta spent on building its latest AI technology.
“The number of companies that have $6 million to spend is far greater than the number of companies that have $100 million or $1 billion to spend,” said Chris V. Nicholson, an investor at venture capital firm Page One Ventures, who focuses on AI technologies.
Since OpenAI kicked off the AI boom in 2022 with the release of ChatGPT, many experts and investors had concluded that no company could compete with the industry leaders without spending hundreds of millions of dollars on specialized chips.
The world's leading AI companies train their chatbots using supercomputers that use as many as 16,000 chips, if not more. In contrast, DeepSeek's engineers said they only needed about 2,000 specialized computer chips from Nvidia.
China's restrictions on chips forced DeepSeek engineers to “train it more efficiently so it could still be competitive,” said Jeffrey Ding, an assistant professor at George Washington University who specializes in emerging technology and international relations.
Earlier this month, the Biden administration issued new rules aimed at preventing China from obtaining advanced AI chips through other countries. The rules build on multiple rounds of previous restrictions that prevented Chinese companies from buying or making advanced computer chips. President Trump has not yet indicated whether he will rescind or rescind the rules.
The US government has tried to keep advanced chips out of the hands of Chinese companies over concerns they could be used for military purposes. In response, some companies in China stockpiled thousands of chips, while others sourced them from a thriving underground marketplace of smugglers.
DeepSeek is run by a quantitative stock trading company called High Flyer. By 2021, it had channeled its profits into purchasing thousands of Nvidia chips, which it used to train its earlier models. The company, which did not respond to requests for comment, has become known in China for bringing in fresh talent from top universities with the promise of high salaries and the ability to pursue the research questions that most pique their interest.
Zihan Wang, a computer engineer who worked on an earlier DeepSeek model, said the company is also hiring people without any computer science backgrounds to help the technology understand and generate poetry and good questions on China's notoriously difficult college entrance exam.
DeepSeek doesn't make products for consumers, allowing its engineers to focus entirely on research. That means its technology is not restricted by the strictest aspect of China's AI regulations, which require consumer-facing technology to comply with government controls on information.
America's leading companies continue to advance the state of the art in AI. In December, OpenAI unveiled a new “reasoning system” called o3, which surpasses the performance of existing technologies, although it is not yet widely available outside the company. But DeepSeek continues to show it's not far behind. This month it released an impressive reasoning model of its own.
(The New York Times sued OpenAI and its partner Microsoft, accusing them of copyright infringement of news content related to AI systems. OpenAI and Microsoft have denied these claims.)
A crucial part of this rapidly changing global market is an old idea: open source software. Like many other companies, DeepSeek has made its latest AI system open source, meaning it has shared the underlying code with other companies and researchers. This allows others to build and distribute their own products using the same technologies.
While employees at major Chinese tech companies are limited to collaborating with colleagues, “when you work on open source you are working with talent all over the world,” says Yineng Zhang, principal software engineer at Baseten in San Francisco, who works on the open source SGLang . project. He helps other people and companies build products using DeepSeek's system.
The open source ecosystem for AI gained steam in 2023 when Meta freely shared an AI system called LLama. Many assumed that this community would only flourish if companies like Meta – tech giants with massive data centers filled with specialized chips – continued to open source their technologies. But DeepSeek and others have shown that they too can expand the power of open source technologies.”
Many executives and experts have argued that major U.S. companies should not open source their technologies because they could be used to spread disinformation or cause other serious harm. Some U.S. lawmakers have explored the possibility of preventing or limiting this practice.
But others argue that if regulators stifle the advancement of open source technology in the United States, China will gain a significant lead. If the best open source technologies come from China, they argue, American developers will build their systems on top of those technologies. In the long term, this could put China at the heart of AI research and development.
“The center of gravity of the open source community has moved to China,” said Ion Stoica, a professor of computer science at the University of California, Berkeley. “This could be a huge danger for the US” because it allows China to accelerate the development of new technologies.
Hours after his inauguration, President Trump revoked a Biden administration executive order that threatened to restrict open source technologies.
Dr. Stoica and his students recently built an AI system called Sky-T1 that can rival the performance of the latest OpenAI system, called OpenAI o1, on certain benchmark tests. They only needed $450 in computing power.
They did this by building on two open source technologies from Chinese tech giant Alibaba.
Their $450 system isn't as powerful as OpenAI's technology or DeepSeek's new system. And the techniques they used are unlikely to produce systems that exceed the performance of the leading technologies. But the project showed that even operations with minuscule resources can build competitive systems.
Reuven Cohen, a technology consultant in Toronto, has been using DeepSeek-V3 since late December. He says it's comparable to the latest systems from OpenAI, Google and San Francisco start-up Anthropic – and much cheaper to run.
“DeepSeek is a way for me to save money,” he said. “This is the kind of technology that someone like me wants to use.”
