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Hello and welcome to Decoder. I'm Neil Apatow, Editor-in-Chief of The Verge, and Decoder is my show about big ideas and other problems. Today, we're talking about the only thing the AI industry and pretty much the entire tech world has been able to talk about for the last week.
DeepSeek, the AI model built by a Chinese hedge fund that's completely upended the conventional wisdom around bleeding edge AI models, what they can do, and importantly, how much they should cost to develop. DeepSeek, if you haven't played with it, is expressed a lot like ChatGPT. There's a website and a mobile app, and you can type into a little text box and have it talk back to you.
What makes it special is how it was built. On January 20th, DeepSeek released a reasoning model called R1, which came just weeks after the company's V3 model, both of which showed some very impressive AI benchmark performance. It quickly became clear that DeepSeek's models perform at the same level, or in some cases even better, than the competing models from OpenAI, Meta, and Google.
And they're totally free to use. But here's the real catch. While OpenAI's GPT-4 reportedly cost as much as $100 million to train, DeepSeek claims that it cost less than $6 million to claim R1. In a matter of days, DeepSeek went viral. It became the number one app in the United States. And on Monday morning, the controversy over its underlying economics punched a hole in the stock market.
Panicked investors wiped more than a trillion dollars off tech stocks in a frenzied sell-off earlier this week, and Nvidia in particular suffered a record stock market decline of nearly $600 billion when it dropped 17% on Monday.
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