Silicon Valley is coming to grips this week with the realization that creating an advanced artificial intelligence model may no longer be as specialized a task as was once believed.
The wakeup call came in the form of DeepSeek, a year-old Chinese start-up whose free, open-source AI model, R1, is more or less on par with advanced models from American tech giants — and it was built for a fraction of the cost, apparently with less advanced chips and it demands far less data center power to run.
Until now, the widely accepted wisdom in the US tech world was that American tech giants could stay ahead by spending billions of dollars, amassing advanced chips and building out huge data centers (despite the environmental cost). Essentially, because they’re among the richest companies in the world, they believed they could throw more resources at the problem than anyone else and come out on top.
OpenAI’s largest investor, Microsoft, is investigating whether DeepSeek trained its model off of stolen OpenAI data, Bloomberg reported. Even if the company achieved its efficiency revolution with some malfeasance, DeepSeek’s achievements have lit a fire under Silicon Valley’s AI industry.
“All those other frontier model labs — OpenAI, Anthropic, Google — are going to build far more efficient models based on what they’re learning from DeepSeek,” said Gil Luria, head of technology research at investment firm D.A. Davidson. “And you’ll be able to use those at a fraction of the price that you can now, because it’s going to be a fraction of the cost to run those models.”
And even if DeepSeek forces a short-term rethinking of the business model Silicon Valley had envisioned for AI, people who believe the technology will change the world should be glad for the advancement, Kass said.
“We are freaked out fairly, I suppose, because we thought we had global AI supremacy, when, in fact, we should be celebrating,” Kass said. “Because this is one more piece of evidence that the AI revolution is going to democratize technology and it’s going to be fairly distributed.”
