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By Eduardo Baptista

BEIJING, Jan 27 (Reuters) - Chinese startup DeepSeek's

launch of its latest AI models, which it says are on a par or

better than industry-leading models in the United States at a

fraction of the cost, is threatening to upset the technology

world order.

The company has attracted attention in global AI circles

after writing in a paper last month that the training of

DeepSeek-V3 required less than $6 million worth of computing

power from Nvidia H800 chips.

DeepSeek's AI Assistant, powered by DeepSeek-V3, has

overtaken rival ChatGPT to become the top-rated free application

available on Apple's App Store in the United States.

This has raised doubts about the reasoning behind some U.S.

tech companies' decision to pledge billions of dollars in AI

investment and shares of several big tech players, including

Nvidia ( NVDA ), have been hit.

Below are some facts about the company shaking up the AI

sector worldwide.

WHY IS DEEPSEEK CAUSING A STIR?

The release of OpenAI's ChatGPT in late 2022 caused a

scramble among Chinese tech firms, who rushed to create their

own chatbots powered by artificial intelligence.

But after the release of the first Chinese ChatGPT

equivalent, made by search engine giant Baidu ( BIDU ) , there

was widespread disappointment in China at the gap in AI

capabilities between U.S. and Chinese firms.

The quality and cost efficiency of DeepSeek's models have

flipped this narrative on its head. The two models that have

been showered with praise by Silicon Valley executives and U.S.

tech company engineers alike, DeepSeek-V3 and DeepSeek-R1, are

on par with OpenAI and Meta's most advanced models, the Chinese

startup has said.

They are also cheaper to use. The DeepSeek-R1, released last

week, is 20 to 50 times cheaper to use than OpenAI o1 model,

depending on the task, according to a post on DeepSeek's

official WeChat account.

But some have publicly expressed scepticism about DeepSeek's

success story.

Scale AI CEO Alexandr Wang said during an interview with

CNBC on Thursday, without providing evidence, that DeepSeek has

50,000 Nvidia H100 chips, which he claimed would not be

disclosed because that would violate Washington's export

controls that ban such advanced AI chips from being sold to

Chinese companies. DeepSeek did not immediately respond to a

request for comment on the allegation.

Bernstein analysts on Monday highlighted in a research note

that DeepSeek's total training costs for its V3 model were

unknown but were much higher than the $5.58 million the startup

said was used for computing power. The analysts also said the

training costs of the equally-acclaimed R1 model were not

disclosed.

WHO IS BEHIND DEEPSEEK?

DeepSeek is a Hangzhou-based startup whose controlling

shareholder is Liang Wenfeng, co-founder of quantitative hedge

fund High-Flyer, based on Chinese corporate records.

Liang's fund announced in March 2023 on its official WeChat

account that it was "starting again", going beyond trading to

concentrate resources on creating a "new and independent

research group, to explore the essence of AGI" (Artificial

General Intelligence). DeepSeek was created later that year.

ChatGPT makers OpenAI define AGI as autonomous systems that

surpass humans in most economically valuable tasks.

It is unclear how much High-Flyer has invested in DeepSeek.

High-Flyer has an office located in the same building as

DeepSeek, and it also owns patents related to chip clusters used

to train AI models, according to Chinese corporate records.

High-Flyer's AI unit said on its official WeChat account in

July 2022 that it owns and operates a cluster of 10,000 A100

chips.

HOW DOES BEIJING VIEW DEEPSEEK?

DeepSeek's success has already been noticed in China's top

political circles. On January 20, the day DeepSeek-R1 was

released to the public, founder Liang attended a closed-door

symposium for businessman and experts hosted by Chinese premier

Li Qiang, according to state news agency Xinhua.

Liang's presence at the gathering is potentially a sign that

DeepSeek's success could be important to Beijing's policy goal

of overcoming Washington's export controls and achieving

self-sufficiency in strategic industries like AI.

A similar symposium last year was attended by Baidu ( BIDU ) CEO

Robin Li.