Satya Nadella Said 'We Should Take Development Out Of China Very, Very Seriously.' Now, DeepSeek's R1 Has Emerged As A ChatGPT Killer, Outperforming OpenAI With 50x Lower Costs: Here's More

Satya Nadella-led Microsoft Corp. MSFT has bet its AI ambitions on OpenAI, pouring billions of dollars into the Sam Altman-led startup. Now, days after he said the China threat needs to be taken seriously, DeepSeek, a China-based AI startup, has beaten OpenAI with 97% less computing power and 50 times lower prices.

What Happened: DeepSeek R1 employs a hybrid architecture that incorporates large-scale reinforcement learning and chain-of-thought reasoning to improve response accuracy.

It is available in two versions: DeepSeek-R1 and DeepSeek-R1-Zero, with the latter featuring unsupervised fine-tuning for superior reasoning skills.

The startup, based in Hangzhou, China, was founded by Liang Wenfeng in July 2023, with the goal of developing advanced AI capable of performing tasks at or beyond human-level proficiency.

The model’s affordability is a significant attraction, with pricing lower by up to 50 times than OpenAI’s offerings.

Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox.

DeepSeek R1 has demonstrated comparable performance to OpenAI’s models in various benchmarks, even outperforming them in certain coding tasks.

Speaking at the World Economic Forum, Microsoft CEO Nadella said, "We should take the developments out of China very, very seriously."

So far, DeepSeek has released six smaller versions of the R1 model, optimized for laptop use, with one surpassing OpenAI’s o1-mini in specific tests.

The launch of DeepSeek R1 has sparked discussions on social media, with users sharing experiences and comparisons with other AI models.

The model’s rapid development, competitive pricing, and open-source initiatives highlight China’s growing influence in the global AI landscape.

Why It Matters: The introduction of DeepSeek R1 has significant implications for the global AI market. The startup created its low-cost model in just two months with less than $6 million, showcasing China’s potential to challenge major players like OpenAI, Alphabet Inc. GOOG GOOGL Google, and Meta Platforms Inc. META.

The model has overtaken ChatGPT as the most downloaded app on Apple’s US store, indicating its growing popularity.

The launch has also impacted the stock market, with major technology stocks experiencing a selloff. Stocks of Nvidia Corp. NVDA and Broadcom Inc. AVGO saw significant declines as DeepSeek’s model threatened U.S. technological leadership.

Moreover, the development has raised questions about the necessity of massive GPU investments. DeepSeek’s open-source approach and technical report suggest that advanced AI systems can be developed on substantially smaller budgets, challenging the current industry norms.

Check out more of Benzinga's Consumer Tech coverage by following this link.

Read Next: