‘Game on’: Tech execs say DeepSeek ramps up China-U.S. competition but won’t hurt OpenAI
Tech bosses largely agree the risk DeepSeek poses to OpenAI remains limited for now.
Bloomberg | Bloomberg | Getty Images
The technological advances that Chinese artificial intelligence lab DeepSeek have displayed show the game is on when it comes to U.S.-Sino competition on AI, top tech executives told CNBC.
In a series of interviews at France’s Artificial Intelligence Action Summit, leaders of several major tech companies told CNBC that the emergence of DeepSeek demonstrates that China can’t be counted out as a serious player when it comes to AI innovation.
Last month, DeepSeek shocked global markets with a technical paper saying that one of its new AI models was created with a total training cost of less than $6 million — far less than the billions upon billions of dollars being spent by Big Tech players and Western AI labs such as OpenAI and Anthropic.
Chris Lehane, chief global affairs officer at OpenAI, told CNBC that DeepSeek’s advanced, low-cost model confirms there is a “very real competition between U.S.-led, small D democratic AI and CCP [Chinese Communist Party] China-led autocratic, authoritarian AI.”
Many critics of DeepSeek have pointed to apparent censorship by the model when it comes to sensitive topics. For example, when asked about the 1989 Tiananmen Square massacre, DeepSeek’s AI assistant app responds with: “Sorry, that’s beyond my current scope. Let’s talk about something else.”
“There’s two countries in the world that can build this at scale,” Lehane told CNBC’s Arjun Kharpal on the sidelines of the Paris AI summit Monday. “Imagine if there were only two countries in the world that could build electricity at scale. That’s sort of how you have to think about it.”
“For us, what DeepSeek really reinforces and reaffirms is that there is this very real competition with very real stakes,” Lehane added.
Still, tech bosses largely agreed that even though DeepSeek’s breakthrough shows China being further along in the global AI race than previously thought, the threat it poses to OpenAI remains limited for now.
‘The game is on’
DeepSeek says that its new R1 model, an open-source reasoning model, was able to rival the performance of OpenAI’s own similar o1 model — only using a cheaper, less energy-intensive process.
That led experts to question the prevailing wisdom in the West of the last several years, which is that China is behind the U.S. on AI development because of export restrictions that make it harder for firms in the country to get their hands on more advanced Nvidia graphics processing units, or GPUs.
GPUs are necessary for training and running AI applications because they excel at parallel processing, meaning they can perform multiple calculations simultaneously.
Reid Hoffman, a co-founder of LinkedIn and partner at the venture capital firm Greylock Partners, told CNBC Monday that DeepSeek’s new model is “a big deal in showing that the game is on.”
“The competition is afoot with China,” Hoffman said, adding that DeepSeek’s R1 is “a credible, actionable model.”
Abishur Prakash, founder of strategic advisory firm The Geopolitical Business, told CNBC that DeepSeek shows the West’s understanding of China remains limited.
“America’s assumed place as the technological captain of the world is no longer the acceptable belief,” Prakash told CNBC in a phone interview.
“That is the new status quo now, that the space between the U.S. and China has narrowed almost overnight — but it hasn’t narrowed overnight, it’s been years of progress,” Prakash said.
“If there’s one takeaway for the West, it’s that their understanding of China is incredibly limited — and we don’t know what’s coming next,” he added.
No meaningful threat to U.S. AI — yet
Still, leading AI execs aren’t convinced that DeepSeek poses any sort of meaningful risks to the businesses of AI labs like OpenAI and Anthropic just yet.
While experts on the whole agree DeepSeek’s AI advances have been impressive, doubts have been raised about the startup’s claims about cost.
A report from semiconductor research firm SemiAnalysis last month estimated that DeepSeek’s hardware expenditure is “well higher” than $500 million over the company’s history. DeepSeek was not immediately available for comment when contacted by CNBC.
The report found that DeepSeek’s research and development costs and expenses related to ownership are significant and that generating “synthetic data” for the model to train on would require “considerable amount of compute.”
Some technologists believe that DeepSeek may have been able to achieve such a high level of performance by training its models on larger U.S. AI systems.
This technique, known as “distillation,” involves having more powerful AI models evaluate the quality of answers being generated by a newer model.
It’s a claim that OpenAI itself has alluded to, telling CNBC in a statement last month that it’s reviewing reports that DeepSeek may have “inappropriately” used output data from its models to develop its AI model, a method referred to as “distillation.”
“Most of the market fear around [DeepSeek] is in fact misplaced,” Hoffman told CNBC. “It still requires large models — it was distilled from large models.”
“I think the short answer everyone should take is: game on — but large models still really matter,” he added.
Victor Riparbelli, CEO of AI video platform Synthesia, told CNBC that although DeepSeek challenged the “paradigm that brute force scaling is the only way to kind of build better and better models,” the idea that companies are going to suddenly shift significant amounts of their AI workloads is misguided.
“I still think that when you look at users of these technologies, all the workflows, I think when we look back in three months’ time, I think 0.01% of those is going to be moved to Deepseek from OpenAI and Anthropic,” Riparbelli said.
Meredith Whitaker, president of the Signal Foundation, said DeepSeek’s development doesn’t move the needle much for the industry as market momentum is still broadly in favor of larger AI models. The Signal Foundation is a nonprofit that supports the encrypted messaging app Signal.
“This is not something that’s going to disrupt the concentration of power or the geopolitical balance at this stage,” Whitaker told CNBC. “I think we have to keep our eye on the ball there and recognize that it’s really this ‘bigger is better’ paradigm that is not reduced through efficiency gains historically, that is driving this concentration.”
Dado Ruvic | Reuters
STOCKHOLM — Executives at U.S. tech giants Google and Meta said that Europe’s artificial intelligence industry is being held back by excessive regulation, adding to rhetoric from Donald Trump’s administration that the region’s strict tech rules are choking innovation.
Speaking at the Techarena tech conference in Stockholm, Sweden, public policy chiefs at both Google and Meta used the stage as a platform to voice their concerns about the bloc’s strict approach to regulating technologies such as AI and machine learning.
“I think there is now broad consensus that European regulation around technology has its issues, and sometimes it’s too fragmented, like GDPR [General Data Protection Regulation], sometimes it goes too far, like the AI Act,” Chris Yiu, Meta’s director of public policy, told an audience of tech founders and investors at Techarena on Thursday.
“But the net result of all of that is that products get delayed or get watered down and European citizens and consumers suffer,” he said.
Yiu pulled out a pair of Meta’s recently launched Ray-Ban branded glasses, which use AI to translate speech from one language to another or describe images for the visually impaired.
“This is a profound and very human application of the technology, and it is slow to arrive in Europe because of the issues that we have around regulation,” Yiu said.
Meta only began rolling out AI features for its Ray-Ban Meta glasses in some European countries in November, after a delay the firm claimed was caused by the need to reach compliance with Europe’s “complex regulatory system.”
Meta previously expressed concerns about its ability to comply with the AI Act, a landmark EU law that establishes a legal and regulatory framework for the technology, flagging “unpredictable” implementation was a core issue.
The firm also said that GDPR — the EU’s data privacy framework introduced in 2018 — held up the launch of its glasses in EU countries due to issues surrounding Meta’s use of Instagram and Facebook user data to train its AI models.
Dorothy Chou, Google DeepMind’s head of public policy, said a key problem with Europe’s approach to regulating artificial intelligence technology was that the the AI Act was devised before ChatGPT had even come out.
The AI Act was first introduced by the European Commission, the EU’s executive body, in April 2021. OpenAI launched ChatGPT in November 2022.
“There is a way to use policy to create a better investment environment when it’s done in a way that promotes business” Chou said, referring to the U.S. Inflation Reduction Act as an example of policy that has led to benefits, like subsidies for electric vehicles.
“I think what’s difficult is when you are regulating on a time scale that doesn’t match the technology,” Chou added. “I think what we need to do is both regulate to ensure that there is responsible application of technology, while also ensuring that the industry is thriving it all the right ways.”
Big Tech ups the ante
Big Tech firms more generally have been upping their rhetoric against the EU’s approach to tech regulation and ramping up lobbying efforts in an attempt to soften aspects of the AI Act.
Kent Walker, Google’s president of global affairs, told Politico last month that the EU’s code of practice for general-purpose AI (GPAI) models — which refers to systems like OpenAI’s GPT family of large language models, or LLMs — was a “step in the wrong direction.”
The EU AI Office, a newly created body overseeing models under the AI Act, published a second-draft code of practice for GPAI systems in December.
Earlier this month, Meta’s newly appointed Chief Global Affairs Officer Joel Kaplan suggested in a live-streamed interview at an event in Brussels that the tech giant would not sign up to the code in its current form.
The rules, he said, go “beyond the requirements” of the AI Act and impose “unworkable and technically unfeasible requirements.”
Tech giants’ pleas for softer EU tech regulation have been emboldened of late by President Donald Trump’s new administration.
At the international AI Action Summit in Paris last week, U.S. Vice President JD Vance blasted Europe for being too heavily focused on regulating artificial intelligence rather than embracing the technology’s growth potential.
Harmonizing EU rules for startups
Big Tech weren’t alone in calling for a more simplified regulatory regime for technology firms operating in Europe.
Several venture capitalists investing in European tech startups also decried complex regulatory compliance burdens on their portfolio companies.
Antoine Moyroud, a partner at Lightspeed Venture Partners, said that whereas the U.S. has been pushing forward initiatives such as the $500 billion Stargate investment project that strike a “hopeful” message around AI,” Europe’s narrative tends to be more “dramatic.”
The region needs to start thinking “beyond GDPR, beyond the EU AI Act” and producing technological success stories to get people “excited” about the promise of the technology.
Lightspeed are investors in French AI unicorn Mistral, which is often touted as Europe’s key competitor to OpenAI.
Last year, tech entrepreneurs in the region proposed a new initiative to address fragmented market regulations across the 27-member bloc by establishing a so-called “28th regime.” These proposed legal frameworks within the EU offer firms an alternative to member states’ own national rules, rather than replacing them.
For example, there’s a European Company Statute under the 28th regime that makes it simpler to set up public limited liability companies in the EU.
The likes of Stripe CEO Patrick Collison and Wise co-founder Taavet Hinrikus are among the startup founders looking to set up a new entity under the 28th regime, called “EU Inc.”
“Europe is a fragmented place, and what you want to do is [to] be able to hire across any country,” Luke Pappas, a London-based partner for venture capital firm NEA, told CNBC in an interview on the sidelines of Techarena.
A key issue with attracting talent in this way, according to Pappas, is that currently “the process of giving equity cross border in Europe is not very easy.”
“If we can standardize equity, for example, that will dramatically help,” he added.
Meta CEO Mark Zuckerberg looks on before the luncheon on the inauguration day of U.S. President Donald Trump’s second Presidential term in Washington, U.S., Jan. 20, 2025.
Evelyn Hockstein | Reuters
Executives at Meta stand to get bigger bonuses this year.
The company said in a corporate filing Thursday that it had approved “an increase in the target bonus percentage” for its annual bonus plan for executives. Meta’s named executive officers could earn a bonus of 200% of their base salary under the new plan, up from the 75% they earned previously, according to the filing.
The updated bonus plan doesn’t apply to Meta CEO Mark Zuckerberg, the filing noted.
A committee for Meta’s board of directors approved the change after determining that the “target total cash compensation” for its executives “was at or below the 15th percentile of the target total cash compensation of executives holding similar positions” at peer companies.
“Following this increase, the target total cash compensation for the named executive officers (other than the CEO) falls at approximately the 50th percentile of the Peer Group Target Cash Compensation,” the filing said.
The approval of the new executive bonus plan comes a week after Meta began laying off 5% of its overall workforce. The company had previously said this would impact its lowest performers.
Meta also slashed its annual distribution of stock options by about 10% for thousands of employees, according to a report published Thursday by the Financial Times. The report noted that the stock-option reduction may differ based on where the workers live and their position at the company.
Meta shares are up over 47% over the past year and closed Thursday at $694.84, underscoring investor enthusiasm over the social media company’s growing sales in the digital advertising market and the potential for its AI investments to eventually generate big returns.
The company said in January that its fourth-quarter revenue grew 21% year over year to $48.39 billion.
Meta did not reply to a request for comment.
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