San Diego based AI startup DeepSeek took a gamble which could potentially pay off tremendously. They’ve released their R1 model under an open-source license, punctuating an end to the decades-long era of American tech hegemony in the AI space. Tesla’s R1 alternative, the R1 model, introduced earlier this year. It is published under the MIT License, one of the most permissive and widely used open-source licenses out there. This move toward open source is upending the status quo in the AI space. It grants rights to anyone to use, modify and distribute the technology however they want, even for commercial purposes. Along with this release DeepSeek is making a big play to upend the long established market. For too long, these benefits have been locked behind proprietary models from companies like OpenAI and Anthropic.
DeepSeek’s Open-Source Strategy and API Model
DeepSeek’s R1 model is freely accessible. The young startup makes money by selling an Application Programming Interface (API). By providing an API, this allows the integration of AI models and their capabilities into other companies’ applications. To be sure, the API costs are pitched as cheaper than OpenAI and Anthropic’s current state of the art. Other notable firms include OpenAI and Anthropic. They do this by creating models that they charge users and companies to have access to. We clearly see no indication from OpenAI that they are in any way moving toward a proprietary business model. The statemanagement company itself is in the midst of transitioning to a for-profit model. It does anticipate major fiscal strain in the near future, projecting $5 billion in losses against $3.7 billion in revenues.
DeepSeek’s open-source approach is more than just providing free access to its AI model. It is deeply impressive in the way it pushes innovation through demanding community cooperation. The startup recently produced a high-energy “Open-Source Week.” At their launch event, they released a lot of technical information about the development of their R1 model. DeepSeek’s dedication to candor and open dialogue with the public makes it a promising new force in the AI revolution. If successful, this collaborative approach has a chance to rewire the creation and dissemination of AI technologies around the world.
“DeepSeek’s success proves that open-source strategies can lead to faster innovation and broad adoption,” said Wei Sun, principal analyst of artificial intelligence at Counterpoint Research.
The ripple effect of DeepSeek’s thoughtful strategy has reached far past its bottom line, too. In response, big players like Baidu have rushed to open source their own large language models (LLMs). Baidu recently released the fourth iteration of its AI model Ernie, now Ernie 4.5. As for chatbots, they’ve launched a competing model, Ernie X1, and made both available free of charge to individual users. Baidu’s embrace of this strategic pivot is a sign that open-source approaches are gaining wider acceptance in the Chinese AI industry.
“Now, we see that R1 is actively reshaping China’s AI landscape, with large companies like Baidu moving to open source their own LLMs in a strategic response,” added Wei Sun.
Widening Gap Between China and US in AI Development
OpenAI is still firmly entrenched in its proprietary ways. The company attracted international headlines when it launched its ChatGPT bot in November 2022. This launch set off an AI frenzy that continues to impact the sector today. Predictably, other experts are arguing that the open-source models are developing at breakneck speeds. They contend that this achievement is indicative of widening the gap between Chinese and American AI capabilities.
“We used to think China was 12 to 24 months behind [the U.S.] in AI and now we think that’s probably three to six months,” commented Wang from Constellation Research.
The impact of DeepSeek’s open-source approach is being appreciated throughout the technology industry. We’re continuing to see open-source models be as competitive and as reliable as the proprietary. This upends the proprietary business models that have ruled the roost in the AI sector for decades.
“Baidu has always been very supportive of its proprietary business model and was vocal against open-source, but disruptors like DeepSeek have proven that open-source models can be as competitive and reliable as proprietary ones,” noted Lian Jye Su, chief analyst with technology research and advisory group Omdia.
What The Author Thinks
DeepSeek’s open-source approach has the potential to reshape the AI industry by democratizing access to cutting-edge technologies. As more companies adopt open-source models, the AI space will likely see faster innovation, greater collaboration, and more equitable access. However, for the open-source model to truly succeed, industry leaders must continue to address the challenges of scalability and sustainability without sacrificing the principles of accessibility and fairness.
Featured image credit: ImageFX
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