DeepSeek has burst the AI hype bubble – now all bets are off

In poker, the value of the cards in your hand is often less important than what your competitors think you might hold. You don’t need a royal flush as long as you can convince others you have one.

Sam Altman, CEO of OpenAI, knows this well, having played poker extensively during his student days. Following the astronomical success of its generative artificial intelligence tool ChatGPT, the company has convinced many backers that it holds all the aces, telling the world that scale is the key to progress and that betting on this will reap big rewards.

On 21 January, Altman announced Stargate, a $500-billion plan to build vast data centres for future AI models. As he said in an interview in 2023: “It’s totally hopeless to compete with us.”

But Chinese AI company DeepSeek now looks to have called his bluff. It sent shock waves through Silicon Valley over the past two weeks with the release of AI models that are apparently as capable as OpenAI’s best, but at a fraction of the cost and computational power (see “Does DeepSeek show a way to slash the energy demands of AI?”). This young upstart, with less than a tenth as many employees as OpenAI, has punctured the idea that US companies hold some secret recipe for building AI or that they need such enormous resources to do so.

For those concerned about the accumulation of power in Silicon Valley, the arrival of competition is welcome, but DeepSeek’s model brings concerns of its own. For one thing, its answers stick closely to the Chinese government’s party line, and it even censors itself in real time. Security researchers have also warned that it lacks robust guardrails against inappropriate use.

Nevertheless, its arrival on the scene suggests there are huge innovations in generative AI yet to come. Plus, cheaper models that require less computational power should open the door to entirely new applications for the technology, which may also make it affordable to more people and less damaging to the planet. With more players around the table, the stakes couldn’t be higher.