The AI race has long been dominated by Western companies like OpenAI, Google, and Microsoft. However, the AI world has faced some turns in January 2025, when DeepSeek, a Chinese AI startup, emerged as a major competitor to the Western tech giants.
With its innovative low-cost development and record-breaking adoption, DeepSeek has emerged as a serious competitor in the AI industry—while also sparking controversy over data privacy and intellectual property.
In this blog post, we’ll explore DeepSeek’s rapid rise, its impact on the market, and the challenges it faces regarding privacy, security, and legal concerns.
What is DeepSeek?
Founded in May 2023 in Hangzhou, DeepSeek operates as an independent AI research lab under High-Flyer, a Chinese hedge fund. Unlike other AI firms that rely on experienced engineers, DeepSeek recruited top PhD students from Chinese universities, prioritizing research over commercial applications.
This unconventional approach has paid off, with DeepSeek’s chatbot app surpassing ChatGPT as the most downloaded free app on the U.S. iOS App Store in January 2025.
DeepSeek’s Market Impact
DeepSeek’s sudden rise shook up not only the AI industry but also the global stock market. Investors reacted rapidly to the news, fearing that DeepSeek’s low-cost, high-performance model could disrupt the competitive landscape and challenge established AI giants.
DeepSeek’s launch in January 2025 caused one of the biggest market shifts in AI history:
- Nvidia’s stock dropped 18%.
- Microsoft, Meta, and Alphabet lost between 2.1% and 4.2%.
- Dell Technologies fell by 8.7%.
DeepSeek vs. ChatGPT
The rise of DeepSeek has led to inevitable comparisons with ChatGPT. While both are powerful AI models, their design, pricing, and performance differ significantly.
1. Smarter or Just More Efficient?
DeepSeek brings a unique approach to AI with its Mixture-of-Experts (MoE) model, which includes 671 billion parameters but only activates 37 billion at a time. This makes it faster and more cost-efficient, as it doesn’t use unnecessary computing power.
On the other hand, ChatGPT follows a more traditional transformer-based model with 175 billion parameters, all running at once. While this allows ChatGPT to handle complex tasks well, it also makes it more expensive and resource-intensive.
2. Development Costs
- DeepSeek: Only $5.6 million to develop.
- ChatGPT: Costs billions of dollars to train and maintain.
3. Performance in Different Tasks
While ChatGPT has long been the leader in the world of AI, DeepSeek is proving to be a serious competitor. Here’s how they stack up in key areas:
Although ChatGPT slightly outperforms DeepSeek in these benchmarks, the differences are small, especially considering DeepSeek’s significantly lower costs.
4. Cost for Users
DeepSeek is much cheaper than ChatGPT for businesses and developers:
- DeepSeek: $0.55 per million input tokens, $2.19 per million output tokens.
- ChatGPT: $15 per million input tokens, $60 per million output tokens.
5. Can DeepSeek Compete with ChatGPT?
DeepSeek is a serious groundbreaker in the AI environment. It may not have surpassed ChatGPT in every area, but its low cost, efficient technology, and rapid adoption make it a major competitor. However, whether it will overcome its privacy controversies and continue its global expansion remains to be seen.
DeepSeek’s Controversies: Privacy, Security, and Legal Issues
1. Data Privacy & Security Concerns
Despite its rapid success, DeepSeek has already encountered serious privacy concerns. In January 2025, cybersecurity researchers discovered exposed software keys and user chat logs, raising alarms about potential data breaches.
This discovery prompted European regulators to launch investigations into DeepSeek’s data handling practices and its compliance with GDPR. The situation escalated further when Italy banned the app from its stores due to privacy violations.
Adding to these concerns is DeepSeek’s Chinese ownership, which has sparked debates about government access to user data. Under China’s National Intelligence Law, companies are required to cooperate with state intelligence agencies, leading to growing fears in both Europe and the U.S. about how DeepSeek manages and safeguards sensitive information.
2. Allegations of Intellectual Property Violations
DeepSeek’s unusually low development costs have raised suspicions about how its AI model was trained. OpenAI alleges that DeepSeek may have used unauthorized ChatGPT data through a process called “distillation,” where an AI model learns from an existing one.
Supporting these claims, Microsoft security researchers reportedly found evidence of unauthorized data harvesting from ChatGPT. Further fueling concerns, some users noticed instances where DeepSeek’s AI mistakenly identified itself as ChatGPT and even referenced OpenAI’s policies.
While DeepSeek has not officially responded to these accusations, the controversy has ignited broader discussions about AI ethics, intellectual property rights, and fair competition in the rapidly evolving AI landscape.
Is DeepSeek the Future of AI?
DeepSeek has disrupted the AI landscape in a way few expected. Its affordable pricing, efficient technology, and rapid adoption have positioned it as a serious competitor to Western AI companies.
However, privacy concerns, legal challenges, and data security risks could create obstacles for its expansion beyond China. With regulators closely watching, DeepSeek’s global future remains uncertain.
As AI continues to evolve, businesses need trusted insights and strategies to stay ahead. At DataNorth, we help companies navigate the complex world of AI—from understanding emerging technologies to ensuring compliance with evolving regulations. Get in touch with us today to see how your business can harness the power of AI responsibly and effectively.
