DeepSeek is a Chinese artificial intelligence (AI) company founded by Liang Wenfeng in May 2023. It has created a powerful AI model called DeepSeek R1, which was launched in January 2025.
This AI model directly competes with big names like ChatGPT, but at a much lower cost of only $6 million (approx. Rs. 50 crores). In comparison, companies like OpenAI and Google have spent hundreds of millions on similar models.
DeepSeek also quickly became popular. Just days after launching, its mobile app became the top free app on Apple’s App Store in countries like the U.S. and China. This success worried investors and even led to a drop in tech stock prices for companies like Nvidia and Microsoft, as people started questioning their high valuations.
Do you want to know more about how DeepSeek is shaking up the AI world? In this article, let’s check out six ways this cheaper AI model is challenging big Western tech companies.
1. Is based on an advanced Mixture-of-Experts (MoE) architecture
DeepSeek R1 is based on the Mixture-of-Experts (MoE) architecture. Instead of using all parts for every task, DeepSeek activates only certain “expert” parts that are most useful for the input. This saves computing power and makes it work much faster and cheaper than regular AI models.
DeepSeek also has a special way of focusing on important details when reading and understanding text. It is known as Multi-Head Latent Attention (MLA). This speeds up processing and saves memory, so the AI can handle complex tasks without slowing down.
2. Is following the hierarchical token processing technique
DeepSeek breaks big pieces of information into smaller and connected parts. This makes it easier for the model to understand and process information. Also, this technique increases the accuracy.
Also, DeepSeek follows a load balancing strategy which keeps everything running smoothly. Some AI models overuse certain parts, making them slower. However, DeepSeek R1 balances the workload across all parts. This ensures it runs smoothly during training.
3. Is cheaper than other AI models
Most AI companies spend billions of dollars to train their models. But DeepSeek built its R1 model for just Rs. 50 crores! This is because it has a smarter design that needs less computing power.
Also, DeepSeek R1 does not use the latest and most expensive computer chips. Instead, it uses simpler and cheaper chips that still give exceptional performance.
As per a popular analysis, DeepSeek’s models cost 20 to 40 times less than OpenAI’s models. Because of this, competitors have already started lowering their prices to stay competitive.
4. Is highly scalable
As mentioned above, DeepSeek AI does not need a lot of computing power. Instead of using the whole model all the time, DeepSeek activates only the necessary parts.
This design allows DeepSeek to expand in two ways:
- Horizontally (adding more GPUs for bigger tasks)
and
- Vertically (increasing complexity without slowing down).
Since only a small part of the model is active at any moment, DeepSeek saves energy and costs while still delivering great results. When required, new parts of the model can be added easily to improve performance.
5. Is competing with major Western AI companies
DeepSeek’s low-cost AI model, DeepSeek R1, is forcing big companies like Google, Meta, and OpenAI to rethink their AI strategies. When this model was launched, it caused major stock market reactions. Investors became worried about the high costs of AI development, which led to a $593 billion drop (Rs. 49 lakh crores) in Nvidia’s market value.
Similarly, other major tech companies like Microsoft and Alphabet also saw their stocks fall. Analysts believe that DeepSeek could:
- Change how AI companies are valued
and
- Lead up to $1 trillion (Rs. 83 lakh crores)Â in market losses across the tech sector
Moreover, DeepSeek has intensified competition and is pushing AI companies to lower prices. Its rise also has geopolitical significance, as it shows that China is competing directly with Western tech giants in AI innovation.
6. Is more environmentally friendly
DeepSeek R1 is more eco-friendly as it reduces energy use by cutting down on unnecessary computing power. Unlike traditional AI models, it does not consume massive amounts of electricity. Instead, it follows an energy-efficient design that requires less power for both training and operation.
Another key reason is that DeepSeek does not require frequent retraining like other AI models. Thus, it does not continuously consume energy to stay updated. This key feature is also promoting its gradual integration in major industries like retail, banking, NBFCs, and manufacturing.
Conclusion
Since its launch in January 2025, DeepSeek is significantly changing the AI economics. This low-cost AI model is directly competing with Western tech giants by offering a high-performing and scalable alternative.
DeepSeek R1 is based on the Mixture-of-Experts (MoE) architecture and uses hierarchical token processing. This allows it to process queries faster, cheaper, and more accurately. The ability to function without high-end chips is forcing major companies like Google and OpenAI to rethink their AI pricing and strategies.
Additionally, DeepSeek is environmentally friendly and consumes minimal energy. In this way, it reduces AI’s carbon footprint that promotes its usage in various sectors, like the online marketplaces, finance, and retail.
