China's DeepSeek triggers global AI price war as tech giants slash API costs - Silicon Canals

"DeepSeek, the Hangzhou-based lab backed by quantitative hedge fund High-Flyer, has forced a reckoning across the AI supply chain by releasing highly capable models at a fraction of the cost charged by OpenAI, Google, and Anthropic. The result: a cascading price war that is reshaping how companies budget for intelligence, how developers choose their tools, and how the entire economics of foundation models may evolve over the next 12 to 18 months."

"In January 2025, DeepSeek released its R1 reasoning model, which matched or exceeded OpenAI's o1 on several key benchmarks. The kicker was the price. DeepSeek's API costs came in at roughly 90-95% cheaper than comparable offerings from OpenAI and Anthropic. The company achieved this through a combination of architectural innovations (notably mixture-of-experts and multi-head latent attention), aggressive training efficiency, and what appears to be a fundamentally different cost philosophy shaped by operating in a market where margins are razor-thin by default."

"According to Reuters reporting, the release sent shockwaves through global markets, wiping hundreds of billions of dollars off the stock valuations of AI infrastructure companies, most notably Nvidia, which saw its largest single-day market cap decline in history."

DeepSeek, a Chinese startup backed by High-Flyer hedge fund, released its R1 reasoning model in January 2025, matching or exceeding OpenAI's o1 performance at 90-95% lower costs. This breakthrough leveraged architectural innovations including mixture-of-experts and multi-head latent attention, combined with aggressive training efficiency and a cost-focused business philosophy. The release triggered massive market disruption, erasing hundreds of billions in AI infrastructure company valuations, particularly Nvidia. Major AI providers responded immediately: OpenAI reduced GPT-4o mini prices and accelerated cheaper API tiers, Google DeepMind made Gemini 1.5 Flash significantly more affordable, and Anthropic adjusted pricing. This cascading price war is fundamentally reshaping AI industry economics, developer tool selection, and enterprise budgeting strategies over the next 12-18 months.

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