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China's DeepSeek-R1: Open-Source AI Rivals OpenAI at 27x Lower Cost

Jan 25, 2025, 11:55 PM

Chinese AI startup DeepSeek has released DeepSeek-R1, an open-source reasoning model that challenges OpenAI's o1 in performance while being significantly more cost-effective. Developed over two months at a cost of $5.5 million—approximately 3% of the cost associated with similar models—DeepSeek-R1 is reported to be 27 times cheaper than OpenAI's o1. The model outperforms American counterparts despite being built with less-powerful chips. The Hangzhou-based company, which began as a deep-learning research branch of Chinese quant hedge fund High-Flyer, has ignited concern in Silicon Valley. DeepSeek's advancements highlight China's progress in AI efficiency and collaboration, suggesting that China's AI industry has almost caught up with America's and challenging U.S. dominance in the field.