Why DeepSeek’s Cheap AI Is Making Silicon Valley Nervous?

DeepSeek founder is Liang Wenfeng, a visionary entrepreneur who made his fortune in AI-driven quantitative trading with his hedge fund, High Flyer. Wenfeng’s expertise in finance and technology led him to pursue a new challenge—building a next-generation AI company capable of competing with global tech giants.

You may be wondering, why is DeepSeek such a big deal? The short answer is that it’s doing what many thought was impossible—developing state-of-the-art AI on a shoestring budget and disrupting the business models of industry giants like OpenAI and Google. Let’s explore the key reasons why DeepSeek is shaking up the tech world.

One of the biggest reasons why DeepSeek is a big deal is its unbelievably low development cost. Most AI companies, including OpenAI, spend hundreds of millions of dollars to train their large language models. DeepSeek, however, managed to develop its R1 model with less than $6 million, using a strategy called "mixture-of-experts."
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​ This method allows DeepSeek’s AI to only activate certain parts of its model at any given time, significantly reducing the need for expensive hardware. For small businesses and developers who can’t afford premium APIs, this approach opens doors to affordable AI without sacrificing performance.

Another major factor in what makes DeepSeek important is its open-source policy. Unlike companies that tightly guard their models, DeepSeek’s code is available to developers who want to modify or build on it. This fosters collaboration, promotes transparency, and provides an alternative to proprietary systems like OpenAI’s GPT-4.
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​ By making its models open source, DeepSeek has gained support from tech enthusiasts who value freedom and control over the tools they use. It’s a stark contrast to other AI platforms where users have little insight into how the technology works behind the scenes.

The success of DeepSeek AI is also a geopolitical story. The U.S. has imposed multiple sanctions to limit China’s access to advanced AI hardware like Nvidia GPUs. Despite these restrictions, DeepSeek has managed to create competitive AI models that rival U.S. tech leaders. This development has sparked concern in Washington, with some calling it a “Sputnik moment” for AI.

DeepSeek's release of R1 didn’t just impact AI development—it disrupted global tech markets. Companies like Microsoft, Nvidia, and Meta saw their stock values drop as investors questioned whether billion-dollar AI investments were sustainable. DeepSeek’s cost-effective approach proved that AI innovation doesn't always require massive resources, shaking up confidence in Silicon Valley’s business models.
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​ Since then, competitors like OpenAI have responded by cutting prices and releasing more affordable models. The AI market is on the verge of a price war, with DeepSeek leading the charge to make AI more accessible to a wider audience.

DeepSeek offers multiple options for users, including free and premium services. Unlike some AI providers, it also supports local deployment, meaning users can run models entirely on their own machines. This feature is crucial for privacy-conscious individuals and businesses that don’t want their data stored on cloud servers.
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​ However, it’s important to note that if you use DeepSeek’s cloud-based services, your data may be stored on servers in China, which raises privacy concerns for some users. For those who prioritize data security, the ability to run DeepSeek locally is a significant advantage.

Now comes the big question: Is DeepSeek better than ChatGPT? Both platforms excel in different areas, so let's look at the key comparisons to help you decide which is right for your needs.

• DeepSeek R1 excels at step-by-step reasoning through tasks, making it ideal for complex queries that require detailed analysis.

• ChatGPT, on the other hand, is better suited for casual conversations, storytelling, and general-purpose Q&A. If you need a model that can engage in friendly, conversational interactions, OpenAI's ChatGPT might feel more natural.

• OpenAI’s GPT-4 and related APIs are notoriously expensive, especially for businesses with high usage.

• In contrast, DeepSeek offers much lower pricing, with API costs that are often a fraction of OpenAI’s rates. This makes it a strong choice for budget-conscious users who need powerful AI without breaking the bank.

• DeepSeek is designed with open-source principles in mind. You can run the models locally, ensuring privacy and full control over your data. This is a major advantage for businesses that handle sensitive information.

• ​ OpenAI, by contrast, keeps its models proprietary, which means users have less access to the internal workings of the technology. While OpenAI has released some open-source tools in the past, they’ve been limited compared to what DeepSeek offers.

• DeepSeek has faced criticism for storing cloud-based user data in China, which raises security concerns for some users. However, if privacy is a top priority, DeepSeek’s ability to run models locally gives you an edge over OpenAI.

• ​ OpenAI, though not free from privacy debates, stores its data within jurisdictions like the U.S. and Europe, which may feel safer to certain users.

• ​ $0.07 per million input tokens (cache hit) and $0.27 per million input tokens (cache miss). 
• $1.10 per million output tokens.
• ​ Ideal for conversational AI, customer support bots, and general text generation.

• ​ $0.14 per million input tokens (cache hit) and $0.55 per million input tokens (cache miss). 
• $2.19 per million output tokens.
• ​ This model incorporates Chain of Thought (CoT) reasoning, making it suitable for complex logic-based tasks and problem-solving.

1. Head to the DeepSeek homepage.
2. Choose the option to create an account.
3. Depending on which country you want to register from, different options may be available: using a phone number, email or Google account.
4. Fill out a short form with your information. For security, DeepSeek may ask you to verify your email before completing the sign-up.
5. After registering, you’ll be directed to the dashboard with chat!

• Generate blog posts, articles, or product descriptions.
• Answer complex questions with step-by-step reasoning, thanks to its chain-of-thought process.
• Create summaries, translations, or technical documentation.

•  Obtain your API key from the dashboard.
• Refer to the API documentation for sample code and integration guidelines.
• Implement the API in your applications for tasks such as text automation or image processing.

• Download the DeepSeek model from the official site.
• Follow the installation instructions provided in the documentation.
• Use the local interface to access all major features without needing an internet connection.

• U.S. government agencies restricting DeepSeek usage within federal departments.
•  European Union regulators investigating compliance with GDPR (General Data Protection Regulation).
• Companies with strict data protection policies advising against using cloud-based AI services like DeepSeek.