DeepSeek deepdive

Summary

Today, Explained - Episode: DeepSeek Deepdive Release Date: January 30, 2025

Hosts: Sean Rameswaram and Noel King
Guest: Eleanor Olcott, Financial Times China Technology Correspondent
Network: Vox Media Podcast Network

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Introduction to DeepSeek

The episode delves into the burgeoning prominence of DeepSeek, an emerging Chinese AI company that has captured global attention with its groundbreaking advancements in artificial intelligence. Hosts Noel King and Reid Albergatti, alongside guest Eleanor Olcott, explore the innovations brought forth by DeepSeek, its impact on the tech landscape, and the ensuing geopolitical ramifications.

The Rise of DeepSeek

Noel King initiates the discussion by highlighting the industry's buzz around DeepSeek, noting endorsements from tech giants like Satya Nadella of Microsoft and Mark Zuckerberg of Meta.

Noel King [00:01]: "Everyone's talking about Deepseek, Deep Seek. Satya Nadella at Microsoft I think Deepseek has, you know, had some real innovation."

Eleanor Olcott provides an in-depth background on DeepSeek's origins and its rapid ascent in the AI domain.

Eleanor Olcott [02:11]: "I first heard about this mysterious AI company in early 2023 because one of my contacts said that this hedge fund silently built one of the largest clusters of Nvidia GPUs in China."

DeepSeek's strategic investment in Nvidia GPUs, crucial for AI model training and inference, positioned it as a formidable competitor, especially amid global shortages of these essential chips.

Innovations and Model Releases

DeepSeek made headlines with the release of DeepSeek V3, touted as the first open-source AI model surpassing closed-source counterparts.

Eleanor Olcott [03:35]: "Deep Seek V3 is the first open source model in all of AI history that is better than the closed source models."

The subsequent release of another advanced model in January further solidified DeepSeek's reputation, stirring both excitement and concern within the AI community.

Market Reactions and Stock Implications

The announcement of DeepSeek's advancements led to significant market volatility, particularly affecting Nvidia's stock due to concerns over GPU demand.

Noel King [19:04]: "What exactly happened on Monday with Nvidia and why did it seem to get hit so hard by this news?"

Eleanor Olcott explains that while DeepSeek achieved greater efficiency, the overall demand for powerful GPUs remains unabated due to the escalating complexity and size of AI models.

Eleanor Olcott [19:33]: "Nvidia is selling a ton of these chips. Really, they can't sell enough. There's way more demand than they can even produce."

Geopolitical Implications and the AI Race

The episode draws parallels between DeepSeek's emergence and the historical Sputnik moment, questioning whether this signifies a new AI arms race between the United States and China.

Noel King [10:52]: "Earlier this week, as the stock market was whipsawing about, we heard people asking whether or not this is AI's Sputnik moment."

Eleanor Olcott contends that while the comparison isn't entirely accurate, DeepSeek's success underscores the intensifying tech rivalry between the US and China, with significant national security implications.

Eleanor Olcott [21:35]: "I think there really are national security concerns about China and AI. If China does win the AI race, the AI race, like let's, let's say it will probably give them a military advantage."

Competitive Dynamics and Industry Reactions

The discussion shifts to how Western competitors, including OpenAI, are responding to DeepSeek's advancements. The guest emphasizes that while DeepSeek's models are impressive, the sheer scale of investment and demand in the AI sector means that Nvidia and other chip manufacturers remain crucial players.

Eleanor Olcott [15:02]: "They're all investing massively in these huge data centers... massive amounts of money."

Allegations of Intellectual Property Concerns

The episode touches upon allegations suggesting that DeepSeek may have borrowed or stolen technology from OpenAI, a claim that DeepSeek and industry experts find contentious.

Noel King [17:29]: "And then there was another wrinkle that appeared a few hours before. We're speaking on Wednesday. There is a suggestion that Deep Seek may have borrowed from OpenAI or stolen from OpenAI? What is the allegation?"

Eleanor Olcott clarifies that the concept of model distillation—using existing AI models to generate specialized synthetic data—is a common practice, though its ethical and legal boundaries remain under debate.

Eleanor Olcott [18:07]: "The process of distillation makes total sense. Whether or not it's stealing, I think that's something... a gray area in the AI industry that we really haven't ironed out yet."

Future Outlook and Industry Impact

Concluding the discussion, the hosts and Eleanor Olcott reflect on the future trajectory of AI development. While DeepSeek's contributions are lauded, the conversation underscores the ongoing challenge of balancing innovation with ethical considerations and geopolitical tensions.

Eleanor Olcott [22:53]: "If the US doesn't win the race to AGI, then what you could see is a Chinese military advantage that leads to something like an invasion of Taiwan and maybe potentially a hot war between these two superpowers."

Key Takeaways

• DeepSeek's ascent showcases China's growing prowess in the AI sector, challenging established Western companies.
• Nvidia's pivotal role in supplying essential hardware remains secure despite innovations in AI efficiency.
• The episode highlights the geopolitical stakes intertwined with AI advancements, suggesting significant future implications.
• Intellectual property and ethical concerns in AI development remain unresolved, necessitating clearer industry standards and regulations.

Conclusion

The episode of Today, Explained offers a comprehensive exploration of DeepSeek's impact on the AI landscape, emphasizing the intricate web of technological innovation, market dynamics, and geopolitical strategy. As the AI race intensifies, the discussions underscore the critical need for collaboration, ethical frameworks, and strategic foresight to navigate the rapidly evolving terrain.

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Notable Quotes:

• Eleanor Olcott [03:35]: "Deep Seek V3 is the first open source model in all of AI history that is better than the closed source models."
• Noel King [10:52]: "Do you think that this development just kicked off the AI race in a way?"
• Eleanor Olcott [21:35]: "If China does win the AI race... it will probably give them a military advantage."

Transcript

[Noel King]

Everyone's talking about Deepseek, Deep Seek. Satya Nadella at Microsoft I think Deepseek has, you know, had some real innovation. Mark Zuckerberg at Meta.

[Reid Albergatti]

You know, I think that there's a, there's a number of novel things that, that they did that I think we're still digesting and there, there are a number of things that they have advances that we will hope to implement in, in our systems.

[Noel King]

The president of America the release of.

[Eleanor Olcott]

Deep Seek AI from a Chinese company should be a wake up call for our industries that we need to be laser focused on competing to win because.

[Noel King]

We have It's a chatbot, it's a white paper. It could help write code for a Tetris game.

[Eleanor Olcott]

Tetris.

[Noel King]

It could solve a math theorem. It's chips. You guys on Today explained the week the world wilded out over Deep Seq and also what is Deep Seek? Coming up.

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[Reid Albergatti]

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[Noel King]

Eleanor Olcott is the Financial Times China Technology correspondent. We reached her in Beijing, where she has been following Deepseek from its very beginnings.

[Eleanor Olcott]

I first heard about this mysterious AI company in early 2023 because one of my contacts said that this hedge fund silently built one of the largest clusters of Nvidia GPUs in China. So Nvidia GPUs are graphic processing units. These are basically the AI chips that you need to power AI model training and inference. They're really, really important for this whole AI ra. They're in short supply in China. So somehow this quant fund, that's a hedge fund in China, had kind of silently built one of the biggest clusters in in the country. We took notice and they started publishing more and more advanced models over the past year. And their work finally pierced through the western consciousness when we were all on Christmas holiday right at the end of 2024. With this new model release V3, there.

[Reid Albergatti]

Is model that has all of the valley buzzing and it does not come from OpenAI or Meta or Google or any of those names.

[Eleanor Olcott]

Deep seq v3 is the first open.

Source model in all of AI history that is better than the closed Source models.

[Reid Albergatti]

Deep seq version 3 is free and it's absolutely insane.

[Eleanor Olcott]

Later in January, it then published another model which again shocked the world with its sophistication. And the key thing here is that the reason that they've prompted a somewh of an existential crisis, especially amongst the US players, is that they claim to have been doing this on such a bootstrap budget.

[Noel King]

All right, When I learned about Deep Seek, it was because the stock market had absolutely collapsed amid the news that this Chinese company had made this thing. What exactly went on earlier this week?

[Eleanor Olcott]

I mean, the stock market is an incredibly mysterious beast, right? I mean, we at the FT have been wr about how Deep Seek and other Chinese companies are building really competitive models for months now. But I think what happened over the past week was we saw all of this frenzied activity on Twitter.

[Noel King]

It's not that people want Deepseek to.

[Eleanor Olcott]

Win, it's that they want OpenAI to lose.

[Sponsor Voice]

Deepseek R1 is one of the most amazing and impressive breakthroughs I've ever seen.

[Noel King]

Deepseek this, Deep Seek that, a profound.

[Eleanor Olcott]

Gift to the world.

[Noel King]

How about you seek a deep connection with a woman?

[Reid Albergatti]

Personally, I'm staying away from Deep Seek. I don't want the Chinese spying on me and seeing what kind of videos I'm watching on TikTok.

[Eleanor Olcott]

Wait, wait, wait. What came out on Monday was a moment, right? It was really, really important because Deep Seq, this kind of little known Chinese lab, for the first time released a paper with a very, very detailed explanation, a kind of technical recipe, as it were, for building a reasoning model. Now, reasoning models are important. It's a fairly new area of AI, but it basically means models that can teach themselves and improve themselves without human supervision. And this is really important because if we can kind of use this in practical applications, it means that AI will be capable of critical thinking and will be useful in tasks that are vastly more complex than what we currently have on the market. The dream, right, is to have an AI, for example, running in the background of your computer and kind of preempting your needs, like booking travel, doing things that you haven't even thought of. Maybe it's kind of acting as your actual personal assistant. They don't just respond to demands. They preempt things.

Hello, Noel, what can I get for you today?

They make decisions on their own. They might, for example, I mean, figure out that you have not got enough groceries in your fridge and think, okay, well, we'll preemptively order that so you don't even have to do it yourself, right? I ordered extra Cheetos this week. You deserve them. It's still very much an open question as to whether or not we're gonna get there. It's important to note as well that this is just like a big marketing strategy on the part of a lot of AI companies also to justify continuing to raise billions of dollars. But what I think Deepseek proved over the past week is actually China is a viable and competitive player in this field.

[Noel King]

So let's talk about where Deepseek comes from. Who's behind this?

[Eleanor Olcott]

So, unlike other AI companies, AI startups in China, it hasn't raised any external financing. So you think, okay, how the hell has a company managed to build what we know is a very expensive endeavor of buying all of these GPUs and also hiring the best talent? They're known along ByteDance for paying the top dollar for the best AI researchers in China. And that's basically a story about the founder, Liang Wenfeng, who has a background as a quant hedge fund manager. So he basically made a whole bunch money trading stocks and decided to plow some of those resources into this new pet project. And he started in 2021 building this large Nvidia cluster because he recognized the potential for this technology. And the timing of that is important for two reasons. The first is that it was really before the world woke up to the potential of generative AI. It was before the release of ChatGPT and the rest of the Chinese players had kind of neglected generative AI' of field research. They were much more focused on surveillance technology, surveillance AI, because it was clear you could make money with that form of AI. The other reason it's significant is because it was really before the first tranche of kind of blanket export controls were put in place on China.

[Reid Albergatti]

The restrictions will limit Chinese companies access to advanced computer chips and slow their progress in artificial Intelligence US chip makers Nvidia and AMD tumbling after the US.

[Noel King]

Ramped up its chip export rules.

[Eleanor Olcott]

Washington says the aim is to prevent Beijing using the most advanced semiconductors for its military modernisation. So really, when the race in China in early 2023 started to replicate, or seeking to replicate OpenAI success, actually Liang and Deepseek were in a pretty good position to get ahead.

[Noel King]

Okay, so brilliant man made a bunch of money and now presumably will make a trillion more dollars. Is that the objective here?

[Eleanor Olcott]

That isn't the objective here. And actually, that's what makes Deep Seek so unique. Right. They have not made any serious moves to commercialize their technology. They have an AI chatbot, it's free to use. What I think he's doing here, and from people who know him, is he wants to just add to the great canon of LLM research. He wants to push this technology forward. And actually also there is a bit of a national pride here element as well. Right. In interviews with domestic press, he says it's important that China also plays a role in developing this technology and being a leader. So I think there's various ambitions at play, but he's a pure technologist. And actually, because deepseek is not interested in commercializing their technology, it's like a pure research lab. People have described it to me being like the early days of DeepMind, where you just have a bunch of engineers, a bunch of researchers working on whatever they think is the best technical pathway forward. But because they don't care about commercialization, that means that they're willing to share the secrets of how they've done that with the rest of the world and kind of enable the others to also learn from their learnings. And for players like OpenAI who are also working on the same research but, you know, not telling the world how they got there, this is really a bit of a challenge.

[Noel King]

Earlier this week, as the stock market was whipsawing about, we heard people asking whether or not this is AI's Sputnik moment. So they're referring to the Soviet Union launching a satellite into space before the United States back in the 50s kicked off the space race. A very big deal. And one of those terms that you don't hear very often, because a Sputnik moment is a big mom. Do you think that this development just kicked off the AI race in a way?

[Eleanor Olcott]

As a journalist, I'm all for fancy metaphors and comparisons. I think the comparison is not completely correct in this case. Right. Like, deepseek is a private company that has just been plugging away on AI research. It's not building rockets to send to space. But having said that, US and China undeniably are in a tech war. We've known this since 2019 and China is very, very concerned about the US getting ahead on AI. And it's been providing a huge amount of support to kind of select players that they think are going to help it remain competitive and gain an edge. But really the Sputnik element is really about the hardware itself, the AI chips. I think the kind of real race here is on Chinese companies and the Chinese ecosystem overall trying to make Huawei or maybe one of the other Chinese competitors. A true long term and successful rival to Nvidia.

[Noel King]

Eleanor Olcott of the Financial Times in Beijing. Coming up next, can Deep seeks competitors looking at you OpenAI compete.

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[Noel King]

You're listening to today, explained Noel King here with Reid Albergatti, technology editor at Semaphore. Read. The reaction on Monday to Deep Seek was huge. The markets are swinging around, people are yelling about Sputnik. It's on everyone page. What did you think about all that?

[Eleanor Olcott]

Well, I was really kind of slapping my forehead because I think it was a complete overreaction. People knew that this company existed and in fact, this, this whole idea of, you know, distilling these larger models into smaller, more powerful ones that are more efficient. This is something that had been going on really since ChatGPT came out. The biggest takeaway for me is that the market really does not understand the AI industry yet.

[Noel King]

What's been going on with all of deepseek's Western competitors, what have they been up to?

[Eleanor Olcott]

They're all investing massively in, you know, these huge data centers. It's my Honor to welcome three of the world's leading technology CEOs, and with hundreds of thousands of graphics processors, tens of billions of dollars. In fact, you probably heard last week there was a deal announced for $500 billion, Stargate. So put that name down in your books with OpenAI and Oracle and MGX and SoftBank. I mean, massive amounts of money.

[Sponsor Voice]

I think this will be the most important project of this era for AGI to get built here, to create hundreds of thousands of jobs, to create a new industry centered here.

[Eleanor Olcott]

And what that is, that investment is for, is running these models because there is so much demand that these companies really can't meet it right now. And what we're also finding is that inference, which is just the fancy term for running these models, actually can now increase capability of the models a lot. That wasn't the case before. When ChatGPT first came out, it was just, you prompt ChatGPT, it comes back with an answer. Now you prompt the most advanced model of these models, and they are doing a whole bunch of stuff in the background. They're running over and over and over again. They're trying to find the best answer, and that is exponentially more expensive. And that is just going to continue. And this new R1 model that Deepseat came out, it's an advance, but it is not nearly a big enough breakthrough to sort of negate those market dynamics.

[Noel King]

Can you explain why? Because, yeah, I saw that as well. DeepSeek did it on the cheap. All of this money and energy and investment is for naught because they came up with the little AI that could, and it didn't even cost that much.

[Eleanor Olcott]

Yeah, I mean, they showed that you can do some of these types of queries at a lower cost, but it's just not nearly low enough. You might have seen Microsoft CEO Satya Nadella talking about Jevon's Paradox. Javon's Paradox strikes again. Basically, that's this. As the technology becomes more efficient and the cost declines, the paradox is that you would think, well, okay, that just means that it just gets cheaper, and these companies are just not gonna make as much money on it. But actually what happens is, you know, it becomes more useful and people want to use it more.

[Noel King]

And then there was another wrinkle that appeared a few hours before. We're speaking on Wednesday. There is a suggestion that Deep Seek may have borrowed from OpenAI or stolen from OpenAI? What is the allegation?

[Eleanor Olcott]

What are people seeing and saying, you know, it's stolen? I mean, that's a very strong word. We saw David Sachs, who's the incoming Aizar, sort of accused deep seq of stealing from OpenAI.

[Reid Albergatti]

And there's substantial evidence that what Deepseek did here is they distilled the knowledge out of OpenAI's models. And I don't think OpenAI is very happy about this.

[Eleanor Olcott]

So, you know, you need data to train these AI models, but what you can actually do is you can, you can use the models themselves to create a very, very specialized kind of data. It's really synthetic data because it's being generated by an AI mod. But you can create exactly the kind of data that you want, and you can check that over with other AI models. And what you end up with is that's how you make these models much more efficient. So this is also not surprising because that's how all of these models work. I mean, we've seen lots of companies do this. So I just, again, the process of distillation makes total sense. Whether or not it's stealing, I think that's something. It's a gray area in the AI industry that we really haven't ironed out yet. I think it's such a new thing that we'll have to sort of come up with the norms and the rules and regulations, maybe even copyright law around this.

[Noel King]

I want to ask you about Nvidia, the company that makes the chips that that AI requires. Nvidia is now basically a household name. It, it takes up a big part of the stock market. And so when Nvidia stock is riding high, so is, you know, my 401k. And when it's tanking, good Lord, I'm gonna retire under a bridge. And on Monday, the bridge was looking like a real possibility. What exactly happened on Monday with Nvidia and why did it seem to get hit so hard by this news?

[Eleanor Olcott]

Yeah, well, Nvidia makes these graphics processing units that are the most powerful, the most advanced in the world, and they're very expensive. I mean, the older models, the H1 hundreds, which were state of the art, they cost about $40,000 a piece. And these data centers have about 100,000 DOL. So you do the math there. Nvidia is selling a ton of these chips. Really, they can't sell enough. There's way more demand than they can even produce. And it's all because these models take a lot of energy. To run. And so if you can have a more efficient one that doesn't require these powerful GPUs, then maybe you don't need to spend $40,000 on a GPU now with OpenAI. But again, that's not really what happened here. What happened here is there's a bit of an advance in how efficient these models can get. In order to get the most use out of them, you need to run a lot of inference on those. You're still going to need really powerful GPUs. And as there are more advances in the pre training part of the models, they'll get even bigger and more powerful. So Nvidia is not going anywhere. I mean, certainly they have competition. There are chip makers that want to build more efficient inference chips. There are people who want to get rid of Nvidia's advantage, which is its Cuda software that the whole AI industry basically runs on right now. It creates a big moat for them. Those are the things that I think are the risks for Nvidia, not, you know, a person, a company building a more efficient open source AI model.

[Noel King]

I think there was a reason that so many watchers and analysts and reporters framed this as China catches up to the US and that is because China and the United States are in a quiet war, cold war existential struggle. We compete with the Chinese. And it raises some questions, does it not, about how worried the US should be that China beats us in the artificial intelligence competition.

[Eleanor Olcott]

Yeah. And this is where, you know, I think there really are national security concerns about China and AI. And you know, if China does win the AI war, the AI race, like let's, let's say it will probably give them a military advantage. I mean, this is far into the future. There's a lot of debate about this. Right. But I mean, I think the conventional wisdom is if you win the AI race and you get your first to AGI or superintelligence or whatever you want to call becomes a military tool very quickly. And I think the U.S. that's the whole reason the U.S. has put so much energy into figuring out how to curb the exports of the most powerful AI chips to China. They don't want to see China be able to sort of control its own destiny when it comes to AI.

[Noel King]

After the events of this week, Reid, is there a sense of renewed competitive energy? Everybody needs to now go back and work harder, faster, smarter for less money.

[Eleanor Olcott]

Yeah, look, I think Sam Altman said that it was invigorating on X.

[Sponsor Voice]

We will obviously deliver much better, better models and Also, it's legit invigorating to have a new competitor.

[Eleanor Olcott]

This is how research works. You know, somebody comes out with a new idea and it inspires other people both, you know, creatively and also competitively. You know, this is a dynamic that we've seen, you know, for the past couple of years in AI or even really more than that. This is why so many of these tech companies have been publishing their research instead of keeping it a trade secret for so long. Because the genius researchers who write these papers, they want to present them, they want bragging rights at the Neurips conference, that's the big AI Model conference every year. They want to get pats on their back from their co workers. And I think there's actually probably a lot of mutual respect between the AI researchers at OpenAI and Anthropic and the ones at Deepseek. If I think in that world, I think it's possible to kind of put aside all the geopolitics and just say, hey, nice job. You created a really interesting model and we're going to learn from it and try to do better. I think the other way to look at it is, look, if the US doesn't win the race to AGI, then what you could see is a Chinese military advantage that leads to something like an invasion of Taiwan and maybe potentially a hot war between these two superpowers. And that would be very, very bad. I think people who, you know, the, the most fervent China hawks, what they really want is a US military advantage that is so big that, you know, there just will be no war. And I think if you look at it through that lens, then yes, I mean, this air race is very, very consequential geopolitically and, and really there are dire consequences if, if the right outcome isn't achieved.

[Noel King]

Semaphore's Reed Albergatti, thanks to him, Miles Bryan and Victoria Chamberlain produced today's show with an assist from Amanda Llewellyn. Amina Elsadi is our editor Andrea Christen's daughter and Rob Byers engineered Laura Bullard checks the facts. I'm Noel Keith King. It's Today Explained.