DeepSeek Champions China’s Bid to Flood the World With Cheap AI

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Only two representatives per institution were allowed. The majority of those present were getting a glimpse of the company’s leader for the very first time.Author of the article:Saritha Rai and Olivia PohLast updated 26 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.o7qkzv3rip3zfx5aadidhkgj_media_dl_1.png Artificial Analysis(Bloomberg) — On a video conference call from Hangzhou earlier this year, one of China’s hottest startups held a four-hour pitch meeting with potential venture investors that was unusual by almost any measure. Only two representatives per institution were allowed. The majority of those present were getting a glimpse of the company’s leader for the very first time.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an Account“We’re a group of very ordinary people,” said Liang Wenfeng, DeepSeek’s elusive founder, according to some of the attendees. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againHis comment belies the extraordinary status of his company, a Chinese startup that has shaken up the global tech industry with powerful models trained on a fraction of the resources used by OpenAI and Anthropic PBC. Liang ultimately raised $7.4 billion in the largest private AI financing in Chinese history, valuing the three-year-old lab at more than $50 billion. Just weeks later, DeepSeek is plotting an initial public offering in 2027 that will likely bring in billions more.Liang is now poised to lead a fresh, potentially more threatening, challenge to Silicon Valley. With coffers full, DeepSeek has more resources to develop cutting-edge AI services and offer them globally at prices far below US rivals. Chinese low-cost, open-source services risk undercutting the business prospects for OpenAI and Anthropic in overseas markets — and increasingly in the US.“DeepSeek isn’t just a technical breakthrough, it’s an economic one,” said Robert Wu, chief executive officer of BigOne Lab, a Chinese analytics company that tracks technology trends. China’s open-source models are already far cheaper than Silicon Valley rivals. The weighted average cost of performing a standardized intelligence task using DeepSeek’s V4 Flash model costs just 2 cents, compared with $2.75 for the same task on Anthropic’s Claude Fable 5, according to benchmarking site Artificial Analysis. DeepSeek’s fundraising signals that pricing and the startup’s reach will only grow more aggressive. For corporate customers, the math is undeniable. San Francisco-based Lindy AI had been using Anthropic’s Claude Sonnet, but switched to DeepSeek after six weeks of evaluation. “We’re now paying about 10% of what we used to pay,” said Flo Crivello, the company’s chief executive officer, adding the startup is saving millions of dollars annually — more than the total cost of its entire 27-person workforce.Big companies that jumped into AI in recent years are growing increasingly cost conscious. Corporations like Tesla Inc. and Meta Platforms Inc. that set up leaderboards to reward employees for “tokenmaxxing,” or using as many AI tokens as possible, are discovering that unbridled spending on AI doesn’t really pay off. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Now, they’re looking to control expenses and get a return on their money — a newfound practicality that’s leading them to services like DeepSeek and Beijing-based Zhipu. Chinese-built open-source models have surged to more than 30% of the market on the AI aggregation platform OpenRouter some weeks this year, compared with less than 2% in 2024.The converts include some of the best-known companies in the US. Airbnb Inc. runs a mix of Chinese open-source models along with Western vendors. Pinterest Inc. touted their utility. Even Microsoft Corp. — one of OpenAI’s biggest backers — is in. Chief Executive Officer Satya Nadella said he’s considering using DeepSeek models in its Copilot Cowork product. Hundreds of US firms are quietly reserving premium models for the hardest reasoning tasks while routing simpler coding, automation and routine workloads to far cheaper Chinese alternatives.DeepSeek didn’t respond to requests for comment for this story, but its record fundraising offers clues about its coming strategy. Investors like Tencent Holdings Ltd. and JD.com Inc. plowed billions of yuan into the startup through a limited partnership controlled entirely by Liang, agreeing to five-year lockups and no voting rights. The only investor spared those terms was the National AI Industry Investment Fund — one of the Chinese government’s primary vehicles for driving the industry’s development. It got direct equity, voting rights and is free to sell whenever it chooses.The asymmetry is telling. Beijing is beginning to view DeepSeek and other frontier AI model developers the way it once treated steel mills and shipyards: national assets to be nurtured, protected and, eventually, turned into exports. DeepSeek represents a bet that the country that learned to make steel, solar panels and smartphones cheap enough to dominate globally can do the same with artificial intelligence. “Chinese open-source models are a remarkably effective competitive response to the billions of dollars US companies have invested in developing frontier AI models,” said Bennett B. Borden, founder and CEO of Clarion AI Partners, a Salt Lake City-based law and tech strategy firm. “By making high-performing models freely available and pricing them aggressively, Chinese developers are lowering the barrier to AI adoption around the world.”TinyFish, a Palo Alto, California-based startup that builds enterprise infrastructure for AI web agents, used to spend six figures a month on AI coding tools. Then it switched from frontier models to alternatives including Chinese open-weight models. Inference costs dived 90%. “This kind of bill is actually a wake-up call for a lot of companies,” said Chief Operating Officer Keith Zhai. DeepSeek fits China’s broader tech agenda. Beijing has said it wants artificial intelligence to be low cost and accessible so it can be adopted quickly throughout the economy. It has pushed back on the prospect of proprietary AI models like Anthropic and OpenAI, which could reach trillion-dollar valuations as they seek to go public in the months ahead. Chinese AI leaders including Zhipu founder and Tsinghua University professor Tang Jie have argued that frontier AI should remain broadly accessible rather than controlled by select individuals — a view echoed by the state-backed People’s Daily. Chinese AI models are also backed by government-supported efforts in everything from affordable energy to local semiconductor players, including Nvidia Corp.-rival Huawei Technologies Co. and memory chip kingpin CXMT Corp. The Chinese alternative to global AI services is aimed at supplying Chinese companies and government agencies with dependable technology at reasonable costs, with the potential to flood the world with cheaper AI that could undercut American rivals. “DeepSeek is not simply one company,” said Yinliang Tan, a professor at Shanghai’s China Europe International Business School. “It is better understood as part of China’s broader effort to industrialize AI: models, chips, cloud infrastructure, applications, and deployment ecosystems moving together.”DeepSeek’s investor list maps to the foundational layers of the industry, according to Jaime Xiao, an AI analyst at Shenzhen-based Success Capital. Battery giant Contemporary Amperex Technology Co. Ltd. is central to producing the massive amounts of energy needed for AI. Huawei produces Ascend chips that compete with Nvidia’s accelerators with state backing. JD.com and Tencent provide real-world applications and distribution for AI models.Energy is emerging as a significant competitive advantage. China has shown it can build new power generation at a speed and scale unmatched anywhere in the world. In 2025 alone, it built 543 gigawatts of generating capacity, more than the total capacity of any country in the world outside of itself and the US. While China cannot export that cheap electricity, it can leverage its massive domestic power to run local data centers and fuel a booming market for AI tokens.“Maybe China doesn’t have the best compute, but China has lots of electricity,” said BigOne Lab’s Wu. “At the end of the day, the cost of AI will just go down and down and down to the cost of energy. China has a clear advantage in that.” —With assistance from Dan Murtaugh.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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