That Sound You Hear is the Bubble Bursting

Most people probably don't realize how bad news China's Deepseek is for OpenAI.

They've come up with a model that matches and even exceeds OpenAI's latest model o1 on various benchmarks, and they're charging just 3% of the price.

It's essentially as if someone had released a… pic.twitter.com/aGSS5woawF

— Arnaud Bertrand (@RnaudBertrand) January 21, 2025

Roll Tape!

It turns out that the basic programming required to generated shitty overgrown Eliza programs is not a uniquely American skill.

Over in China, Deepseek has released an "AI" that is largely open source, and the paid part of it costs 3% of what OpenAI charges.

Look out below:

On Monday, Chinese AI lab DeepSeek released its new R1 model family under an open MIT license, with its largest version containing 671 billion parameters. The company claims the model performs at levels comparable to OpenAI's o1 simulated reasoning (SR) model on several math and coding benchmarks.

Alongside the release of the main DeepSeek-R1-Zero and DeepSeek-R1 models, DeepSeek published six smaller "DeepSeek-R1-Distill" versions ranging from 1.5 billion to 70 billion parameters. These distilled models are based on existing open source architectures like Qwen and Llama, trained using data generated from the full R1 model. The smallest version can run on a laptop, while the full model requires far more substantial computing resources.

The releases immediately caught the attention of the AI community because most existing open-weights models—which can often be run and fine-tuned on local hardware—have lagged behind proprietary models like OpenAI's o1 in so-called reasoning benchmarks. Having these capabilities available in an MIT-licensed model that anyone can study, modify, or use commercially potentially marks a shift in what's possible with publicly available AI models.

The US AI industry, and Sam Altman in particular, have been selling the idea that AI is hard and expensive.

That's why Altman has been saying that OpenAI needs a TRILLION dollars in capital.

It looks to me like the Chinese have come up with something better, faster, and cheaper.

It looks like the VCs won't have time to sell their stakes to the rubes before it all comes crashing down.

Heh.