DeepSeek AI, the Rising Chinese Powerhouse

The fast-paced world of AI was taken by storm yesterday by a newly created AI tool at a fraction of the cost paid by its U.S. rivals. Chinese tech startup DeepSeek AI is seriously challenging the U.S. AI monopoly.

DeepSeek AI was founded by Liang Wenfeng in May 2023 and is effectively a spinout of High-Flyer AI, a hedge fund reportedly managing $8 billion in assets. High-Flyer AI was created to leverage AI algorithms for trading across various financial instruments.

The AI wave has been using a lot of computing power to teach large language models how to answer prompts from users. This research has been possible through the construction of data centers which stack high-performance graphic processors, such as the chips Nvidia creates. What’s more, the amount of global electricity used jumped from roughly 15 Terawatt-hours (TWh) to closer to 46TWh in 2024 alone.

Having said that, DeepSeek’s R1, unveiled on 20th January R1 “can nearly match the capabilities of its far more famous rivals, including OpenAI ’s GPT-4, Meta 's Llama and 谷歌 's Gemini — but at a fraction of the cost.” (According to CNN) They claim to have developed this model using less advanced technology and fewer computer chips, then other U.S. tech giants. This is a major challenge for the U.S., who has been holding technological AI dominance and has been limiting in the past year, Chinese firms’ access to chips to prevent a rapid AI development. These claims, although they need to be closely verified, have managed to cause some stirrup on the American market.

While it is hard to believe that China can achieve on a shoestring budget what U.S. tech giants have spent billions on, there are reasons to be sceptical. They have certainly managed to challenge the aura of invincibility surrounding America’s technology industry, but is that enough?

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