What is DeepSeek? Everything you need to know about the Chinese AI startup

The Chinese startup DeepSeek has shaken up the tech world with its new R1 AI model. It is considered groundbreaking as it operates with impressive performance at a fraction of the cost of competing models such as OpenAIS ChatGPT. But what is behind this innovation, and why is DeepSeek causing such turbulence in the industry? In this blog post, we answer all important questions about the Chinese AI startup.

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DeepSeek: An AI startup with global impact

DeepSeek was founded in 2023 by Liang Wenfeng, a Chinese entrepreneur and co-founder of the hedge fund High-Flyer. The startup focuses on developing high-performance AI solutions that are more efficient and cost-effective than existing alternatives.

Here are some key facts about DeepSeek and its latest R1 model:

• Founding year: 2023
• Flagship model: R1 — presented on January 20, 2025
• Core focus: Cost-effective and powerful AI models
• Open source: R1 is freely accessible and supports the global AI community through open program code.

With its latest app, DeepSeek has even overtaken ChatGPT in the Apple App Store ranking — a clear indication of the strong demand for the technology.

How does DeepSeek R1 work?

DeepSeek R1 is based on an innovative architecture that is designed for efficiency and cost optimization. Here are the main features of the model:

• Computing power: R1 was trained on around 2,000 Nvidia H800 chips, a stripped-down version of the high-performance Nvidia H100 chips. According to DeepSeek, training costs were just 5.6 million dollars — far less than the hundreds of millions of dollars that OpenAI or Meta spend on their models.
• Efficient architecture: Instead of using a large language model like ChatGPT, DeepSeek uses smaller models that perform specialized tasks more efficiently.
• Reinforcement learning: R1 uses pure reinforcement learning, which allows the AI to optimize complex decisions independently.
• “DeepThink” mode: This mode makes it possible to understand the thought processes and thought chain of AI — an advantage for users who are looking for transparency in AI decisions.

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Why is DeepSeek causing turmoil in the tech industry?

The R1 model has not only changed the technological landscape, but has also triggered significant market reactions:

1. Turbulence at Nvidia: The stock of the US chipmaker plummeted by 17%, representing a loss of 589 billion dollars in market value. The reason: DeepSeek shows that powerful AI models can be run with less expensive hardware, which threatens Nvidia's business model.
2. Cost benefits: Analysts estimate that DeepSeek R1 is up to 40 times cheaper to operate than comparable OpenAI models. This calls into question the multi-billion dollar investments made by Western companies in expensive data centers.
3. Geopolitical significance: DeepSeek reinforces China's ambitions to become leaders in AI research. This increases pressure on Western companies to deliver innovations faster.

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How does DeepSeek R1 compare to ChatGPT?

DeepSeek R1 is often compared with OpenAIS ChatGPT. In many areas, the Chinese model is a serious competitor:

Benefits of DeepSeek R1:

• efficiency: Lower hardware requirements and lower costs.
• efficiency: Tests showed that R1 performs as well as ChatGPT in math, coding and thinking tasks.
• Ease of use: The app is minimalistic and easy to access — via web, mobile app or API.

DeepSeek R1 weaknesses:

• Politically sensitive issues: R1 avoids critical discussions on sensitive topics such as the status of Taiwan or the human rights situation in China. Instead, the chatbot tries to steer the conversation to non-political topics.
• Data basis: Compared to ChatGPT, R1 is based on a significantly smaller database, which could limit versatility in some applications.

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Why are investors concerned about DeepSeek?

The low costs and open-source nature of R1 could fundamentally change the strategies of western tech giants. Companies such as Meta and OpenAI are currently investing billions in AI infrastructure. But DeepSeek shows that there is another way.

• Investment risk: If other companies follow DeepSeek's example, the high spending on expensive hardware and data centers in Silicon Valley could be called into question.
• Dependency on Nvidia: DeepSeek has shown that AI also works with stripped-down chips. This could reduce the need for high-performance chips and weaken Nvidia's market position.
• Market competition: DeepSeek could quickly gain further market share, particularly in emerging markets that are looking for cost-effective AI solutions.

FAQ: Everything you need to know about DeepSeek

What is DeepSeek?
DeepSeek is a Chinese AI startup that specializes in low-cost, high-performance models.

How is DeepSeek R1 different from ChatGPT?
R1 is more efficient and cheaper to operate, but shows weaknesses when it comes to politically sensitive issues.

Why is DeepSeek affecting Nvidia stock?
Since DeepSeek works with stripped-down Nvidia chips, it questions the high dependence on expensive chips in the AI industry.

Is DeepSeek a threat to Western AI companies?
DeepSeek could be a wake-up call to develop more efficient and cost-effective AI solutions.

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Conclusion: DeepSeek — A revolution in the AI industry?

With R1, DeepSeek has sent a strong signal to the AI world: Powerful AI doesn't have to be expensive. The low costs and high efficiency of the model could fundamentally change the strategies of Western companies and redefine the global AI landscape.

For companies that want to be successful in this dynamic environment, it is crucial to understand the latest developments and develop innovative strategies. The KI Company will help you with this — contact us now for a non-binding consultation!