DeepSeek: The Chinese AI Startup Challenging OpenAI

DeepSeek’s success highlights an unintended outcome of the ongoing tech cold war between the US and China.

The Rise of DeepSeek

DeepSeek, stunned the global AI community by releasing an open-source model, DeepSeek-R1. This model has quickly become a topic of discussion in Silicon Valley, outpacing industry leaders like OpenAI’s models in math and reasoning benchmarks. DeepSeek-R1 has not only matched but surpassed its competitors in metrics such as capability, cost, and openness, positioning DeepSeek as a formidable player in the AI space.

A Consequence of the US-China Tech Cold War

DeepSeek’s success highlights an unintended outcome of the ongoing tech cold war between the US and China. With US export controls restricting Chinese firms’ access to advanced chips, many Chinese companies shifted their focus to application-based AI development. However, DeepSeek took a different route by revolutionizing foundational AI model structures and optimizing resource usage.

Marina Zhang, an associate professor at the University of Technology Sydney, explains, “DeepSeek’s software-driven resource optimization and open-source collaboration have set it apart, proving that innovation can thrive even under resource constraints.”

From Hedge Fund to AI Leader

DeepSeek’s roots trace back to High-Flyer, a prominent quantitative hedge fund in China founded in 2015. Initially, High-Flyer utilized its GPU stockpile for financial data analysis through its research arm, Fire-Flyer. In 2023, Liang Wenfeng, the hedge fund’s founder with a computer science background, pivoted resources into DeepSeek to develop cutting-edge AI models and pursue artificial general intelligence. This move was driven more by scientific curiosity than profit motives.

“Basic science research has a low return-on-investment ratio,” Liang admitted. “When OpenAI’s early investors funded it, they weren’t thinking about profits but about pursuing something significant.”

The Talent Behind DeepSeek

Liang’s vision extended to recruiting young, ambitious researchers from China’s top universities, including Peking University and Tsinghua University. Most of DeepSeek’s core technical team comprises recent graduates, fostering a collaborative culture focused on unorthodox research.

“Young researchers are often driven by passion and mission,” Liang noted. This approach contrasts sharply with the competitive, resource-constrained environments typical of Chinese tech giants.

This generation of researchers is also motivated by a sense of patriotism, particularly in light of US-imposed restrictions. Marina Zhang observed, “Their determination reflects both personal ambition and a broader commitment to advancing China’s global innovation standing.”

Innovation in Adversity

The US government’s export controls on advanced chips like Nvidia’s H100 in October 2022 presented a significant challenge for DeepSeek. With a limited stockpile of GPUs, the company developed innovative methods to optimize resource usage, employing custom communication schemes, memory-saving techniques, and mix-of-models approaches. These strategies allowed DeepSeek to train its models using a fraction of the computing power required by competitors like Meta.

The firm’s progress in Multi-head Latent Attention (MLA) and Mixture-of-Experts has further enhanced efficiency. According to Epoch AI, DeepSeek’s latest model required just one-tenth the computing resources of Meta’s Llama 3.1 model.

The Impact of Open Source

DeepSeek’s decision to open-source its innovations has earned widespread recognition within the global AI research community. Open sourcing not only accelerates development but also attracts contributors who help refine and expand the models. Wendy Chang, a policy analyst at the Mercator Institute for China Studies, commented, “DeepSeek has demonstrated that cutting-edge models can be built more efficiently, challenging the norms of resource-intensive AI development.”

Implications for US Export Controls

DeepSeek’s achievements may force a reassessment of US export controls targeting China’s access to AI computing resources. By showcasing how to achieve cutting-edge results with limited resources, DeepSeek has highlighted gaps in the effectiveness of these restrictions. “Existing estimates of China’s AI capabilities could be upended,” Chang noted.

A New Path for AI Development

DeepSeek’s rise underscores a pivotal shift in AI innovation. By prioritizing efficiency, collaboration, and foundational advancements, the company has proven that significant breakthroughs are possible even under constraints. As DeepSeek continues to make waves, its success could inspire a new wave of resource-optimized AI development worldwide.

The Case for Open Source: Insights from Industry Leaders

For Meta’s chief AI scientist, Yann LeCun, DeepSeek’s success underscores the importance of open-source models. He noted that the takeaway is not just about the perceived competition from China but the broader impact of open-source AI. “Open source models are surpassing proprietary ones,” LeCun said in a post on Threads.

Echoing this sentiment, Meta CEO Mark Zuckerberg has been an advocate for open-source AI. Days after DeepSeek’s announcement, Zuckerberg revealed plans for Meta to invest over $60 billion in AI in 2025. “Part of my goal for the next 10-15 years is to build the next generation of open platforms and have the open platforms win,” he stated in September. According to Zuckerberg, this strategy will lead to a more vibrant and innovative tech industry. (source — businessinsider.com, wired.com)

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