Remember DeepSeek?
The Chinese AI startup sent shockwaves through tech markets in January, wiping billions off NVIDIA’s market cap and forcing OpenAI to slash prices. After months of relative quiet, they’re back with an updated R1 reasoning model, and this time, it’s available for commercial use under an MIT license.
What’s New
DeepSeek released an updated version of its R1 reasoning model on Wednesday with minimal fanfare; no press release, just a brief message in their WeChat group calling it a “minor trial upgrade.” The 685-billion parameter model is now live on Hugging Face for public testing.
Early user reports suggest this isn’t as ‘minor’ as advertised.
Developers are noting improved code generation, better structured reasoning, and cleaner output quality. The model now ranks just behind OpenAI’s o4-mini and o3 models on LiveCodeBench, a coding benchmark, but ahead of xAI’s Grok 3 mini and Alibaba’s Qwen 3.
Plenty of Reddit users are comparing its coding performance favorably to Claude 3.7, while others highlight deeper reasoning capabilities similar to Google’s models.
The improvements come with trade-offs. Users report slower response times, but most consider this acceptable given the improved accuracy and output quality. The model’s Chain-of-Thought reasoning appears more structured and deliberate compared to its predecessor.
Market Context and Timing
DeepSeek’s original R1 launch proved that cutting-edge AI doesn’t require Silicon Valley budgets. Built reportedly at a fraction of the cost of competing models, it challenged assumptions about AI development and forced established players to reconsider their pricing strategies. Google introduced discounted Gemini tiers, while OpenAI cut prices and released its less compute-intensive o3 Mini model.
This update reinforces that competitive pressure. While Chinese tech giants like Alibaba and Tencent have released models claiming to surpass DeepSeek’s performance, the startup continues to iterate and improve, quietly but consistently. The timing coincides with ongoing U.S. export controls on semiconductor technology, yet DeepSeek continues advancing despite these restrictions.
The company is widely expected to release R2, the successor to R1, though the timeline remains unclear..
What This Means for Business
For enterprise decision-makers, DeepSeek’s return creates both opportunities and strategic questions. The MIT license eliminates ongoing usage fees, potentially cutting AI operational costs for companies with the technical infrastructure to host large models locally. This matters most for businesses with heavy AI workloads where API costs from providers like OpenAI or Anthropic add up quickly.
The model also offers supply chain diversification, reducing dependence on U.S.-based AI providers, important for global companies or those concerned about service continuity amid geopolitical tensions. However, the infrastructure requirements are substantial. At 685 billion parameters, this isn’t something most companies can run on standard hardware.
More broadly, DeepSeek’s continued innovation raises pricing questions across the industry. If comparable AI capabilities can be developed and deployed more cost-effectively, are enterprises overpaying established providers? The answer depends on your specific use case, technical capabilities, and risk tolerance.
The real takeaway: the AI vendor landscape remains in flux. DeepSeek may have gone quiet after their January debut, but they’re building steadily.
For businesses making long-term AI investments, that persistence – and the competitive pressure it creates – is worth watching.
