The day after Christmas, a small Chinese startup called DeepSeek unveiled a new AI system that could match the capabilities of cutting-edge chatbots from companies like OpenAI and Google.
This 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 small portion of the highly specialized computer chips that leading AI companies rely on to train their systems.
These chips are at the heart of the tense technological competition between the United States and China. As the US government works to maintain the country’s lead in the global artificial intelligence race, it is trying to limit the number of powerful chips, such as those made by Nvidia in Silicon Valley, that can be sold to China and other competitors.
But the performance of the DeepSeek model raises questions about the unintended consequences of trade restrictions imposed by the US government. The controls have forced researchers in China to get creative with a wide range of tools freely available online.
The DeepSeek chatbot answered questions, solved logical problems, and wrote its computer programs as efficiently as anything already on the market, according to standard tests used by American AI companies.
It was created on the cheap, challenging the prevailing idea that only the largest companies in the technology industry – all based in the United States – can afford to make the most advanced AI systems. Chinese engineers said they only needed about $6 million in raw computing power to build their new system. That’s about 10 times less than what tech giant Meta spent building its latest AI technology.
Chris said in. “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,” says Nicholson, an investor at venture capital firm Page One Ventures. Artificial intelligence technologies.
Since OpenAI sparked the AI boom in 2022 with Release ChatGPTMany experts and investors have concluded that no company can compete with market leaders without spending Hundreds of millions of dollars on specialized chips.
The world’s leading AI companies train their chatbots using supercomputers that use up to 16,000 chips, if not more. On the other hand, DeepSeek engineers said they only need about 2,000 specialized computer chips from Nvidia.
Jeffrey Ding, an assistant professor at George Washington University who specializes in emerging technology and international relations, said restrictions on chips in China forced DeepSeek engineers to “train them more efficiently so they remain competitive.”
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 prevent Chinese companies from being able to buy or manufacture advanced computer chips. President Trump has not yet made clear whether he will implement the rules or rescind them.
The US government has tried to keep advanced chips out of the hands of Chinese companies due to concerns that they could be used for military purposes. In response, some companies in China stockpiled thousands of chips, while others sourced them locally A thriving underground market From smugglers.
DeepSeek is run by a quantitative stock trading company called High Flyer. By 2021, it had funneled its profits into acquiring thousands of Nvidia chips, which it used to train its previous models. The company, which did not respond to requests for comment, has become known in China for attracting new talent from top universities with the promise of high salaries and the ability to pursue research questions that interest them.
Zihan Wang, a computer engineer who worked on DeepSeek’s previous model, said the company is also hiring people with no computer science background to help the technology understand and be able to generate poetry and excel at the extremely difficult Chinese college entrance exam.
DeepSeek doesn’t make any consumer products, leaving its engineers to focus entirely on research. This means that its technology is not constrained by the stricter aspects of Chinese regulations on artificial intelligence, which require consumer-facing technology to comply with government controls on information.
Leading American companies continue to develop the latest in artificial intelligence technology. In December, OpenAI revealed a A new “inference” system called o3 Which exceeds the performance of existing technologies, although it is not yet widely available outside the company. But DeepSeek continues to show that it is not far behind. And this month, it released an impressive logic model of its own.
(The New York Times has File a lawsuit against OpenAI and its partner Microsoft are accusing them of copyright infringement on news content related to artificial intelligence systems. OpenAI and Microsoft have denied these claims.)
An important part of this rapidly changing global market is an old idea: open source software. Like many other companiesDeepSeek has opened up its latest AI system, 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, “if you work on open source, you work with talent all over the world,” said Yining Zhang, a senior software engineer at Baseten in San Francisco who works on SGLang. Open source. project. It helps people and other companies build products using the DeepSeek platform.
The open source AI ecosystem 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 — technology giants with massive data centers full of specialized chips — continued to open source their technologies. But DeepSeek and others have shown that they, too, can extend the powers of open source technologies.
Many executives and pundits have argued that major American companies should not open source their technologies because of this They can be used to spread misinformation or cause other serious harm. Some US lawmakers have explored the possibility of banning or stifling the practice.
But others argue that if regulators stifle progress in open source technology in the United States, China will gain a significant advantage. If the best open source technology comes from China, they say, American developers will build their systems on top of those technologies. In the long term, this could put China at the center of AI research and development.
“The center of gravity of the open source community is shifting to China,” said Ion Stoica, a computer science professor at the University of California, Berkeley. “This could pose a significant risk to the United States, because it allows China to accelerate the development of new technologies.
Hours after his inauguration, President Trump rescinded 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 rivals the performance of the latest OpenAI system, called OpenAI o1, on some benchmark tests. They needed just $450 of computing power.
They did this by building on two open source technologies released by Chinese tech giant Alibaba.
Their $450 system isn’t as powerful as the OpenAI technology or the new DeepSeek system. The techniques they used are unlikely to yield systems that exceed the performance of leading techniques. But the project showed that even operations with scant 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 startup Anthropic — and much cheaper to use.
“DeepSeek is a way for me to save money,” he said. “This is the kind of technology someone like me would want to use.”
