Chinese AI startup DeepSeek's $6 million vs $250 billion of big US cloud companies: What about privacy concerns?

Chinese startup DeepSeek has claimed it took just two months and cost under $6 million to build an AI model using Nvidia's less-advanced H800 chips. An app powered by the V3 model became the top iPhone download in the U.S. on Monday, as per a report.

The startup founded in 2023 has said its AI models either match or outperform top U.S. rivals at a fraction of the cost, challenging the view that scaling AI requires vast computing power and investment, Reuters reported.

Such a business need has powered an increase of around $10 trillion in the market value of "Magnificent Seven" companies since ChatGPT kicked off the AI boom in November 2022.


Also Read : Single’s Inferno Season 4: Part 3 release date, time, episode schedule and where to watch

Analysts argue DeepSeek's training costs for its V3 model could be higher as the nearly $6 million cited by the startup only includes the amount spent on computing power, while little is known about the costs to build the more publicized R1 model.

Still, it is a far cry from the $250 billion analysts estimate big U.S. cloud companies will spend this year on AI infrastructure. That spending has been questioned by investors worried about slow returns in the past year.

While the price of using AI models has been falling with rising competition and the progress in the technology, Bernstein's Rasgon said DeepSeek stands out as it has priced its models at up to 40 times lower than OpenAI's comparable models.

That could, analysts said, start a price war for AI services, potentially pressuring tech companies such as OpenAI that are already losing billions of dollars each year due to the high operational costs of running services such as ChatGPT.

Privacy Concerns

Some experts also doubt that U.S. businesses would be willing to embrace Chinese AI technology, given Sino-U.S. tensions and concerns about data privacy and security.

DeepSeek has said it stores user information in servers in China, which could be a sticking point in its U.S adoption.

Some investors, however, believe American tech giants would pounce on DeepSeek's breakthroughs and that cheaper AI services are bound to increase technology adoption, which could lift demand for chips.

Australia's science minister raised privacy concerns over China's breakout AI chatbot DeepSeek on Tuesday, urging users to think carefully before downloading it, AFP reported.

Also Read: Meta threatened by DeepSeek? Mark Zuckerberg scrambles war rooms of engineers to figure out how the Chinese startup outsmarted AI titans at a fraction of the price

Australian Science Minister Ed Husic urged caution saying Chinese companies sometimes differed from Western rivals when it came to user privacy and data management.

Australia in 2018 banned Chinese telecommunications giant Huawei from its national 5G network, citing national security concerns.

FAQs

Q1. When did Australia ban Huawei?
A1. Australia in 2018 banned Chinese telecommunications giant Huawei from its national 5G network, citing national security concerns.

Q2. Is there privacy concern about China's AI startup DeepSeek?
A2. Some experts also doubt that U.S. businesses would be willing to embrace Chinese AI technology, given Sino-U.S. tensions and concerns about data privacy and security.