DeepSeek’s AI claims have shaken the world — but not everyone’s convinced
Dado Ruvic | Reuters
Chinese artificial intelligence firm DeepSeek rocked markets this week with claims its new AI model outperforms OpenAI’s and cost a fraction of the price to build.
The assertions — specifically that DeepSeek’s large language model cost just $5.6 million to train — have sparked concerns over the eyewatering sums that tech giants are currently spending on computing infrastructure required to train and run advanced AI workloads.
But not everyone is convinced by DeepSeek’s claims.
CNBC asked industry experts for their views on DeepSeek, and how it actually compares to OpenAI, creator of viral chatbot ChatGPT which sparked the AI revolution.
What is DeepSeek?
Last week, DeepSeek released R1, its new reasoning model that rivals OpenAI’s o1. A reasoning model is a large language model that breaks prompts down into smaller pieces and considers multiple approaches before generating a response. It is designed to process complex problems in a similar way to humans.
DeepSeek was founded in 2023 by Liang Wenfeng, co-founder of AI-focused quantitative hedge fund High-Flyer, to focus on large language models and reaching artificial general intelligence, or AGI.
AGI as a concept loosely refers to the idea of an AI that equals or surpasses human intellect on a wide range of tasks.
Much of the technology behind R1 isn’t new. What is notable, however, is that DeepSeek is the first to deploy it in a high-performing AI model with — according to the company — considerable reductions in power requirements.
“The takeaway is that there are many possibilities to develop this industry. The high-end chip/capital intensive way is one technological approach,” said Xiaomeng Lu, director of Eurasia Group’s geo-technology practice.
“But DeepSeek proves we are still in the nascent stage of AI development and the path established by OpenAI may not be the only route to highly capable AI.”
How is it different from OpenAI?
DeepSeek has two main systems that have garnered buzz from the AI community: V3, the large language model that unpins its products, and R1, its reasoning model.
Both models are open-source, meaning their underlying code is free and publicly available for other developers to customize and redistribute.
DeepSeek’s models are much smaller than many other large language models. V3 has a total of 671 billion parameters, or variables that the model learns during training. And while OpenAI doesn’t disclose parameters, experts estimate its latest model to have at least a trillion.
In terms of performance, DeepSeek says its R1 model achieves performance comparable to OpenAI’s o1 on reasoning tasks, citing benchmarks including AIME 2024, Codeforces, GPQA Diamond, MATH-500, MMLU and SWE-bench Verified.
In a technical report, the company said its V3 model had a training cost of only $5.6 million — a fraction of the billions of dollars that notable Western AI labs such as OpenAI and Anthropic have spent to train and run their foundational AI models. It isn’t yet clear how much DeepSeek costs to run, however.
If the training costs are accurate, though, it means the model was developed at a fraction of the cost of rival models by OpenAI, Anthropic, Google and others.
Daniel Newman, CEO of tech insight firm The Futurum Group, said these developments suggest “a massive breakthrough,” although he shed some doubt on the exact figures.
“I believe the breakthroughs of DeepSeek indicate a meaningful inflection for scaling laws and are a real necessity,” he said. “Having said that, there are still a lot of questions and uncertainties around the full picture of costs as it pertains to the development of DeepSeek.”
Meanwhile, Paul Triolio, senior VP for China and technology policy lead at advisory firm DGA Group, noted it was difficult to draw a direct comparison between DeepSeek’s model cost and that of major U.S. developers.
“The 5.6 million figure for DeepSeek V3 was just for one training run, and the company stressed that this did not represent the overall cost of R&D to develop the model,” he said. “The overall cost then was likely significantly higher, but still lower than the amount spent by major US AI companies.”
DeepSeek wasn’t immediately available for comment when contacted by CNBC.
Comparing DeepSeek, OpenAI on price
DeepSeek and OpenAI both disclose pricing for their models’ computations on their websites.
DeepSeek says R1 costs 55 cents per 1 million tokens of inputs — “tokens” referring to each individual unit of text processed by the model — and $2.19 per 1 million tokens of output.
In comparison, OpenAI’s pricing page for o1 shows the firm charges $15 per 1 million input tokens and $60 per 1 million output tokens. For GPT-4o mini, OpenAI’s smaller, low-cost language model, the firm charges 15 cents per 1 million input tokens.
Skepticism over chips
DeepSeek’s reveal of R1 has already led to heated public debate over the veracity of its claim — not least because its models were built despite export controls from the U.S. restricting the use of advanced AI chips to China.
DeepSeek claims it had its breakthrough using mature Nvidia clips, including H800 and A100 chips, which are less advanced than the chipmaker’s cutting-edge H100s, which can’t be exported to China.
However, in comments to CNBC last week, Scale AI CEO Alexandr Wang, said he believed DeepSeek used the banned chips — a claim that DeepSeek denies.
Nvidia has since come out and said that the GPUs that DeepSeek used were fully export-compliant.
The real deal or not?
Industry experts seem to broadly agree that what DeepSeek has achieved is impressive, although some have urged skepticism over some of the Chinese company’s claims.
“DeepSeek is legitimately impressive, but the level of hysteria is an indictment of so many,” U.S. entrepreneur Palmer Luckey, who founded Oculus and Anduril wrote on X.
“The $5M number is bogus. It is pushed by a Chinese hedge fund to slow investment in American AI startups, service their own shorts against American titans like Nvidia, and hide sanction evasion.”
Seena Rejal, chief commercial officer of NetMind, a London-headquartered startup that offers access to DeepSeek’s AI models via a distributed GPU network, said he saw no reason not to believe DeepSeek.
“Even if it’s off by a certain factor, it still is coming in as greatly efficient,” Rejal told CNBC in a phone interview earlier this week. “The logic of what they’ve explained is very sensible.”
However, some have claimed DeepSeek’s technology might not have been built from scratch.
“DeepSeek makes the same mistakes O1 makes, a strong indication the technology was ripped off,” billionaire investor Vinod Khosla said on X, without giving more details.
It’s a claim that OpenAI itself has alluded to, telling CNBC in a statement Wednesday that it is reviewing reports DeepSeek may have “inappropriately” used output data from its models to develop their AI model, a method referred to as “distillation.”
“We take aggressive, proactive countermeasures to protect our technology and will continue working closely with the U.S. government to protect the most capable models being built here,” an OpenAI spokesperson told CNBC.
Commoditization of AI
However the scrutiny surrounding DeepSeek shakes out, AI scientists broadly agree it marks a positive step for the industry.
Yann LeCun, chief AI scientist at Meta, said that DeepSeek’s success represented a victory for open-source AI models, not necessarily a win for China over the U.S. Meta is behind a popular open-source AI model called Llama.
“To people who see the performance of DeepSeek and think: ‘China is surpassing the US in AI.’ You are reading this wrong. The correct reading is: ‘Open source models are surpassing proprietary ones’,” he said in a post on LinkedIn.
“DeepSeek has profited from open research and open source (e.g. PyTorch and Llama from Meta). They came up with new ideas and built them on top of other people’s work. Because their work is published and open source, everyone can profit from it. That is the power of open research and open source.”
WATCH: Why DeepSeek is putting America’s AI lead in jeopardy
– CNBC’s Katrina Bishop and Hayden Field contributed to this report
Nurphoto | Nurphoto | Getty Images
Meta is testing a long-awaited pause feature on Instagram Reels that will allow users to start and stop videos with just one tap.
The new feature is the latest sign that Meta is looking to capitalize on TikTok’s uncertain future in the U.S. after it briefly went dark earlier this month. The popular short-form video app, which is owned by the Chinese company ByteDance, could be banned for good on April 5 and is still unavailable on the Apple and Google app stores.
The pause feature is currently available to a small group of users around the globe, Meta said. The company was unable to specify when it will roll out more broadly.
Previously, Instagram users have only been able to pause videos on Instagram Reels by tapping and holding on their screen, requiring more work than simply tapping the screen to pause on TikTok. Previously, one tap on Instagram Reels would mute a video’s audio, but the video would continue to play. On Thursday, CNBC was able to pause Instagram Reels videos with a single tap.
Thousands of users have left comments and taken to other social media to lobby for a Reels pause button.
“Hello @instagram, can I please request a pause button on reels?? sincerely, a grieving former TikTok scroller,” one user posted on social media site X while TikTok was offline for a few hours in the U.S. earlier this month.
Besides the Reels pause button, Meta this month has announced a new video editing app called Edits that will compete directly with ByteDance’s CapCut editing app. Edits will launch in February, Instagram chief Adam Mosseri said in a post.
Meta is also paying creators to promote Instagram on TikTok, Snapchat, YouTube Shorts and other short-form video platforms, CNBC reported Sunday.
Shares of Meta are up slightly on Thursday, a day after the company reported fourth-quarter earnings that beat analysts’ estimates on the top and bottom lines.
“We’re going to learn what’s going to happen with TikTok, and regardless of that, I expect Reels on Instagram and Facebook to continue growing,” Meta CEO Mark Zuckerberg said on a call with analysts Wednesday.
Omar Marques | Lightrocket | Getty Images
Apple is struggling to squeeze growth out of its flagship iPhone unit, but its profit margin keeps going up thanks to a flourishing services business.
In its fiscal first-quarter earnings report on Thursday, Apple reported a gross margin — the profit left after accounting for the cost of goods sold — of 46.9%. That’s the highest on record, surpassing the 46.6% margin the company record in the period ending March 2024.
For Apple, services includes App Store purchases, advertising, payments, AppleCare support and other subscription offerings. The growth in those products has offset a slowdown in sales of the iPhone and a saturation in the global smartphone market.
The “services business in general in aggregate is accretive to the overall company margin,” Apple CFO Kevan Parekh said on the earnings call after the report.
In the current quarter, Apple said its gross margin will be between 46.5% and 47.5%.
IPhone sales slipped almost 1% in the latest quarter from a year earlier, as the company reported weakness in Greater China. Total revenue rose almost 4% to $124.3 billion.
Services revenue rose about 4% to $26.34 billion, beating analysts’ estimates. The business now accounts for roughly 21% of Apple’s overall revenue. Last quarter, Apple announced that its services unit had turned into a $100 billion a year business.
“We were thrilled to bring customers our best-ever lineup of products and services during the holiday season,” CEO Tim Cook said in the press release.
Cook’s emphasis on services has transformed Wall Street’s view of a company that’s been defined over the decades by its iconic devices. For many years in the iPhone era, Apple’s gross margin would predictably come in at between 38% and 39%, reflecting the company’s tight grip over its supply chain and its pricing power in the market.
But with iPhone growth slowing in recent years, Apple’s move into services has changed the equation. The company hit a 40% gross margin in 2021 and has continued to expand it.
Because of Wall Street’s love of profit, Apple’s been able to keep delivering for investors. The stock rose 31% last year, outperforming the Nasdaq, and the company’s market cap has climbed to $3.6 trillion.
“We believe Apple deserves to trade at premiums to its historical comparable valuation, as it sets itself further apart as a provider of premium electronic consumer devices and high-margined digital services, and notably as the age of on-device generative AI gets underway,” analysts at Argus wrote in a report earlier this month. They recommend buying the stock.
Apple shares rose more than 3% in extended trading after Thursday’s report.
WATCH: Apple’s AI integration going to be very important moving forward
OpenAI CEO Sam Altman speaks next to SoftBank CEO Masayoshi Son after U.S. President Donald Trump delivered remarks on AI infrastructure at the Roosevelt Room in the White House in Washington on Jan. 21, 2025.
Carlos Barria | Reuters
OpenAI is in talks to raise up to $40 billion in a funding round that would lift the artificial intelligence company’s valuation to as high as $340 billion, CNBC has confirmed.
Masayoshi Son’s SoftBank would lead the round, contributing between $15 billion and 25 billion, according to two people familiar with the negotiations who asked not to be named because the talks are ongoing. SoftBank would surpass Microsoft as OpenAI’s top backer.
The Wall Street Journal was first to report on the talks.
Part of the funding may be used for OpenAI’s commitment to Stargate, a joint venture between SoftBank, OpenAI and Oracle that was introduced by President Donald Trump last week, the sources said. The plan calls for billions of dollars to be invested in U.S. AI infrastructure.
OpenAI was last valued at $157 billion by private investors. In late 2022, the company launched its ChatGPT chatbot and kicked off the boom in generative AI. OpenAI closed its latest $6.6 billion round in October, gearing up to aggressively compete with Elon Musk’s xAI, as well as Microsoft, Google, Amazon and Anthropic.
Meanwhile, Chinese startup lab DeepSeek is blowing up in the U.S, presenting fresh competition to OpenAI. DeepSeek saw its app soar to the top of Apple’s App Store rankings this week and roiled U.S. markets on reports that its powerful model was trained at a fraction of the cost of U.S. competitors.
At an event in Washington, D.C., on Thursday hosted by OpenAI, CEO Sam Altman said DeepSeek is “clearly a great model.”
“This is a reminder of the level of competition and the need for democratic Al to win,” he said. He said it also points to the “level of interest in reasoning, the level of interest in open source.”
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