China floods the world with new low-cost AI models after DeepSeek’s success, undercutting OpenAI, Google, and others

DeepSeek did more than just show the AI industry you don’t have to spend billions to build artificial intelligence. Since DeepSeek upstaged OpenAI in January with a powerful model that purportedly cost just several million dollars to build, China’s tech leaders have flooded the market with a rapid succession of low-cost AI services, undercutting premium offerings from the likes of OpenAI and Alphabet Inc.’s Google. If DeepSeek’s low-cost template is replicated, that may also shrink the profits for Nvidia which specializes in the expensive AI chips, making valuation “adjustments” inevitable, said Amr Awadallah, founder and chief executive officer of Vectara Inc. Chinese companies have in past years squeezed out global rivals in industries as varied as electric vehicles and solar panels, by out-manufacturing and undercutting their competitors. Not just AI model builders, but the large AI enablers that are also driving the growth of the industry.” The open-source, high-performance, resource-efficient models that followed DeepSeek’s January announcement are being replicated and used globally, including in the US and India — even as businesses and government officials in these countries move to restrict access to DeepSeek itself on employee devices. Chinese developers are reshaping the market and calling into question the massive infrastructure investments pledged by big US tech companies such as OpenAI and Microsoft Corp. “If you assume the Chinese LLM players’ intent is to disrupt the market and steal share, it’s worked,” said James Wilton, managing partner and founder of Monevate, a consultancy for tech companies.