The day after Christmas, a small Chinese start-up called DeepSeek unveiled a new artificial intelligence system that could match the capabilities of cutting-edge 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 major 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 leadership in the global race for artificial intelligence, it is trying to limit the number of powerful chips, like those made by Silicon Valley firm Nvidia, that can be sold to China and other other rivals.
But the DeepSeek model’s performance raises questions about the unintended consequences of the US government’s trade restrictions. The controls have forced Chinese researchers to get creative with a wide range of tools freely available on the Internet.
DeepSeek’s chatbot answered questions, solved logical problems and wrote its own computer programs as skillfully as anything already on the market, according to benchmark tests used by American artificial intelligence companies.
And it was created on the cheap, challenging the prevailing notion that only the largest tech companies – all based in the United States – could afford to build the most advanced AI systems. Chinese engineers said they only needed about $6 million in computing power to build their new system. That’s about 10 times less than tech giant Meta spent 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 the venture capital firm Page One Ventures, which focuses on Artificial Intelligence Technologies.
Since OpenAI sparked the AI boom in 2022 with the release of ChatGPT, many experts and investors had come to the conclusion that no company could 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. DeepSeek engineers, on the other hand, said they only needed about 2,000 of Nvidia’s specialized computer chips.
Chip constraints in China forced DeepSeek’s 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 technologies and international relations.
Earlier this month, the Biden administration issued new rules that aim to prevent China from obtaining advanced artificial intelligence chips through other countries. The rules build on multiple sets of previous restrictions that prevent Chinese companies from buying or producing cutting-edge computer chips. President Trump has not yet indicated whether he will keep the rules or repeal them.
The U.S. government has tried to keep advanced chips out of the hands of Chinese companies over fears they could be used for military purposes. In response, some companies in China have stockpiled thousands of chips, while others have purchased them from a thriving underground market of smugglers.
DeepSeek is operated by a quantitative stock trading firm 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 scooping up 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 software engineer who worked on a previous DeepSeek model, said the company also hires people without any computer knowledge to help the technology understand and be able to generate excellent poems and questions on the notoriously difficult entrance exam at Chinese University.
DeepSeek doesn’t make products for consumers, letting its engineers focus entirely on search. That means its technology isn’t bound by the strictest aspects of China’s AI regulations, which require consumer-facing technology to comply with government controls on information.
Major American companies continue to advance the state of the art in artificial intelligence In December OpenAI unveiled a new “reasoning” system called o3 that outperforms existing technologies, although it is not yet widely available outside of agency. But DeepSeek continues to prove that it is not far behind. This month he published his impressive reasoning model.
(The New York Times is suing OpenAI and its partner, Microsoft, accusing them of copyright infringement of news content related to artificial intelligence systems. OpenAI and Microsoft have denied those allegations.)
A crucial part of this rapidly evolving 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 create and distribute their own products using the same technologies.
While employees at big Chinese tech companies simply collaborate with colleagues, “if you work on open source, you work with talent from all over the world,” said Yineng Zhang, a chief software engineer at Baseten in San Francisco who works on open source. ‘open source SGLang. project. Help other people and companies create products using the DeepSeek system.
The open source ecosystem for AI gained traction in 2023 when Meta freely shared an AI system called LLama. Many assumed that this community would only thrive if companies like Meta – tech 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 expand the powers of open source technologies.”
Many executives and experts have argued that large U.S. companies should not make their technologies public because they could be used to spread misinformation or cause other serious harm. Some U.S. lawmakers have explored preventing or limiting the practice.
But others argue that if regulators stifle the progress of open source technology in the United States, China would gain a significant advantage. If the best open source technologies come from China, they argue, US developers will build their systems on 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 has shifted to China,” said Ion Stoica, a computer science professor at the University of California, Berkeley. “This could pose a huge danger to the United States,” because it allows China to accelerate the development of new technologies.
Hours after taking office, President Trump rescinded an executive order from the Biden administration that threatened to curb open source technologies.
Dr. Stoica and his students recently built an AI system called Sky-T1 that rivals the performance of OpenAI’s latest system, called OpenAI o1, on some benchmark tests. They needed just $450 in 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 OpenAI’s technology or DeepSeek’s new system. And the techniques used are unlikely to produce systems that outperform leading technologies. But the project demonstrated 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 use.
“DeepSeek is a way for me to save money,” he said. “This is the kind of technology that someone like me wants to use.”