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DeepSeek AI's low cost is "likely a fictional story", expert says


DeepSeek’s arrival has caused a huge stir in the artificial intelligence industry. Its AI models achieve comparable or superior performance to its competitors on multiple parameters. What’s most impressive is the company’s claims about the low cost invested in the training process. However, some experts question DeepSeek AI’s alleged low cost, with one even saying it’s “likely a fictional story.”

Analyst says DeepSeek AI’s claimed low training cost is “likely a fictional story

AI-focused Western companies typically spend hundreds of millions of dollars on AI training alone. Next-generation advanced models are estimated to require billions in expenses even. Yet somehow, DeepSeek AI managed to train its most advanced AI model, “R1,” using only $6 million, or so the company claims. Not only that, but they even developed it in just a couple of months.

DeepSeek claims it achieved the massive cost reduction by turning to older NVIDIA H800 chips instead of more modern hardware. The collaborative approach of the Chinese AI industry was also said to have helped. However, Wedbush analyst Dan Ives labeled DeepSeek’s claims aslikely a fictional story.” For reference, OpenAI’s GPT-4 model required about $100 million in AI training only.

Furthermore, OpenAI suspects that DeepSeek used a “shortcut” in the process of training its AI. The Chinese company could have integrated data from GPT models into its own using distillation. This would have helped them save a lot of resources, but OpenAI’s terms of use prohibit it. OpenAI encourages third parties to build apps on its API, but not to mine its data to train other LLMs.

Other experts that question DeepSeek’s alleged low cost

There are also questions related to the AI training ​​hardware allegedly used by DeepSeek. Scale AI CEO Alexandr Wang said that “DeepSeek has about 50,000 NVIDIA H100s that they can’t talk about,” as US trade restrictions prohibit them from buying them. Elon Musk backed up this claim with a simple and straightforward “Obviously” on X/Twitter.

Josh Kushner, founder of Thrive Capital and a major investor in OpenAI, also said that DeepSeek likely violated current US trade restrictions. Palmer Luckey, founder of Oculus, is another prominent name who raises doubts about the alleged less than $6 million invested by the Chinese firm. Plus, a US official recently claimed that DeekSeek used stolen American technology.

It’s noteworthy that DeepSeek has some serious financial muscle behind it. The company is backed by the Chinese High-Flyer fund which has a valuation of $8 billion. Billionaire investor Bill Ackman raised the possibility that DeepSeek AI’s alleged low cost was a High-Flyer strategy to benefit from a crash in the shares of NVIDIA and others.





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