DeepSeek complete explained: Everything you need to know 2025

DeepSeek, a Chinese AI firm, is shaking up the industry with its low-cost, open-source large language models, posing a serious challenge to U.S. tech giants.

Breaking the AI Norms

For years, the belief was that developing powerful large language models required massive funding and cutting-edge technology. That’s why the U.S. government pledged to back the $500 billion Stargate Project, announced by President Donald Trump.

But DeepSeek has flipped that idea on its head. On January 20, 2025, the Chinese AI firm stunned the world by releasing its R1 large language model (LLM) at a fraction of the cost of its competitors. What made it even more disruptive? DeepSeek offered its R1 models under an open-source license, making them freely available to the public.

DeepSeek complete explained: Everything you need to know 2025

Within days, DeepSeek’s AI assistant—an easy-to-use chatbot app powered by R1—shot to the top of Apple’s App Store, surpassing OpenAI’s ChatGPT in downloads. The ripple effect was immediate: On January 27, 2025, stock markets took a hit as investors started doubting the long-term dominance of U.S.-based AI companies. Tech giants like Nvidia, Microsoft, Meta, Oracle, and Broadcom saw their stock values plummet as the world took notice of DeepSeek’s rapid rise.

What is DeepSeek?

DeepSeek is an AI research company based in Hangzhou, China. It was founded in May 2023 by Liang Wenfeng, a graduate of Zhejiang University and co-founder of High-Flyer, a quantitative hedge fund that owns DeepSeek. While the company’s funding and valuation remain undisclosed, its impact on the AI landscape is undeniable.

DeepSeek is committed to developing open-source LLMs. Its first model debuted in November 2023, but it wasn’t until January 2025—with the release of the groundbreaking R1 reasoning model—that the company gained worldwide recognition.

The company offers multiple access points for its AI models, including a web platform, a mobile app, and an API for developers.

DeepSeek vs. OpenAI: The Battle for AI Supremacy

DeepSeek’s rise presents the most significant challenge yet to OpenAI, which has dominated the generative AI space since ChatGPT launched in 2022. Both companies are in the business of building AI-powered LLMs, but they take very different approaches.

Feature	OpenAI	DeepSeek
Founded	2015	2023
Headquarters	San Francisco, USA	Hangzhou, China
Focus	Broad AI capabilities	Efficient, open-source models
Key Models	GPT-4o, o1	DeepSeek-V3, DeepSeek-R1
Specialized Models	DALL-E (image generation), Whisper (speech recognition)	DeepSeek Coder (coding), Janus Pro (vision model)
API Pricing (per million tokens)	o1: $15 (input), $60 (output)	R1: $0.55 (input), $2.19 (output)
Open-Source Policy	Limited	Mostly open-source
Training Approach	Supervised fine-tuning	Reinforcement learning
Development Cost	Hundreds of millions of dollars (o1)	Less than $6 million (R1)

DeepSeek’s Training Innovations

DeepSeek’s approach to training its R1 model is unlike anything seen before. Unlike OpenAI, which requires enormous computing power and expensive AI accelerators, DeepSeek achieved similar performance with fewer resources, at a fraction of the cost.

DeepSeek’s ultimate goal? Artificial General Intelligence (AGI)—AI that can think, reason, and solve problems like a human. To get there, the company introduced several breakthroughs in AI training:

• Reinforcement Learning – Unlike OpenAI’s supervised fine-tuning, DeepSeek trained R1 using large-scale reinforcement learning, which significantly enhanced its reasoning abilities.

• Reward Engineering – DeepSeek developed a unique rule-based reward system, outperforming traditional neural reward models.

• Distillation – By using efficient knowledge transfer techniques, DeepSeek compressed complex AI capabilities into models as small as 1.5 billion parameters.

• Emergent Behavior Networks – The company discovered that complex reasoning abilities can naturally develop through reinforcement learning, without explicit programming.

DeepSeek’s AI Models

Since its inception, DeepSeek has steadily built a series of generative AI models, each one improving on the last:

• DeepSeek Coder (Nov 2023) – The company’s first open-source AI model, specialized in coding tasks.

• DeepSeek LLM (Dec 2023) – A general-purpose AI model.

• DeepSeek-V2 (May 2024) – An improved LLM with better performance and lower training costs.

• DeepSeek-Coder-V2 (July 2024) – A massive 236-billion-parameter model with a 128,000-token context window for advanced coding tasks.

• DeepSeek-V3 (Dec 2024) – A 671-billion-parameter model using a mixture-of-experts architecture for diverse AI tasks.

• DeepSeek-R1 (Jan 2025) – Built on DeepSeek-V3, R1 is optimized for reasoning tasks and directly competes with OpenAI’s o1 model.

• Janus-Pro-7B (Jan 2025) – A vision model designed to understand and generate images.

Why the U.S. is on Edge

DeepSeek’s R1 model has sent shockwaves through the U.S. tech industry, sparking concerns across multiple fronts:

• Cost Disruption – DeepSeek developed R1 for less than $6 million, a fraction of what U.S. companies spend. The affordability of R1 threatens the existing AI business model, especially since DeepSeek’s services are much cheaper than OpenAI’s.

• Tech Breakthroughs Despite U.S. Restrictions – The U.S. has placed strict export bans on high-end AI chips to China. Yet, DeepSeek has proven that world-class AI can be developed without them.

• Threat to U.S. Business Models – Unlike OpenAI’s proprietary technology, DeepSeek’s open-source approach offers free AI models, disrupting the revenue streams of U.S. tech giants that rely on subscription-based AI services.

• Geopolitical Rivalry – DeepSeek’s rise challenges U.S. dominance in AI. Some experts have even called this moment AI’s "Sputnik moment," likening it to the Soviet Union’s space race victory in the 1950s.

The consequences were immediate: On January 27, 2025, the Nasdaq Composite dropped 3.4%, while Nvidia’s stock plunged 17%, wiping out $600 billion in market value in a single day.

Cyberattacks Target DeepSeek

With all eyes on DeepSeek, cybercriminals weren’t far behind.

On January 27, 2025, the company reported a massive cyberattack that forced it to temporarily halt new user registrations. The timing was suspicious—it happened just as DeepSeek’s AI assistant overtook ChatGPT as the top app on the Apple App Store.

While the company managed to keep services running for existing users, the attack persisted into the next day. DeepSeek later confirmed that it had identified the issue and deployed a fix, though it didn’t disclose the exact nature of the attack. Security experts believe it was likely a DDoS attack, targeting its API and web chat platform.

DeepSeek’s Data Leak Scandal

As if the cyberattack wasn’t enough, DeepSeek also faced a serious data breach.

On January 29, 2025, cloud security firm Wiz Research revealed that DeepSeek had accidentally exposed a publicly accessible database, leaking chat history, internal logs, API keys, and operational details. Once notified, DeepSeek quickly took the database offline, but the damage had already been done. It remains unclear how long the sensitive data was available to the public.

Final Thoughts:

DeepSeek’s meteoric rise is rewriting the rules of the AI industry. With its open-source, low-cost approach, it has not only challenged AI’s biggest players but also sparked global concerns about the future of AI dominance.

Will DeepSeek become the new leader in AI, or will U.S. tech giants fight back? One thing is clear: The AI war has just begun.