DeepSeek's new chatbot boasts an impressive introduction: "Hi, I was created so you can ask anything and get an answer that might even surprise you." This AI, a product of the Chinese startup DeepSeek, has rapidly become a major market player, even contributing to a significant drop in NVIDIA's stock price.

DeepSeek's success stems from its innovative architecture and training methods. Key technologies include:

• Multi-token Prediction (MTP): Instead of predicting words individually, MTP forecasts multiple words simultaneously, boosting accuracy and efficiency.
• Mixture of Experts (MoE): This architecture uses multiple neural networks, accelerating training and improving performance. DeepSeek V3 utilizes 256 networks, activating eight for each token.
• Multi-head Latent Attention (MLA): MLA focuses on crucial sentence parts, repeatedly extracting key details to minimize information loss and capture subtle nuances.

While DeepSeek initially claimed a remarkably low training cost of $6 million for DeepSeek V3 using only 2048 GPUs, SemiAnalysis revealed a far more substantial infrastructure: approximately 50,000 Nvidia Hopper GPUs (including 10,000 H800, 10,000 H100, and additional H20 GPUs) spread across multiple data centers. This translates to a server investment of roughly $1.6 billion and operational expenses of approximately $944 million.

DeepSeek, a subsidiary of the Chinese hedge fund High-Flyer, owns its data centers, providing control over optimization and faster innovation implementation. This self-funded approach enhances flexibility and decision-making. The company also attracts top talent, with some researchers earning over $1.3 million annually, primarily from Chinese universities.

DeepSeek's initial $6 million training cost claim is misleading; it only reflects pre-training GPU usage, excluding research, refinement, data processing, and infrastructure. The company's total investment in AI development exceeds $500 million. However, its lean structure allows for efficient innovation implementation compared to larger, more bureaucratic companies.

DeepSeek's success showcases the potential of a well-funded independent AI company to compete with industry giants. While its "revolutionary budget" claims are exaggerated, its success is undeniably linked to substantial investment, technical advancements, and a strong team. The contrast is stark when comparing training costs: DeepSeek spent approximately $5 million on R1, while ChatGPT-4 cost an estimated $100 million. Even considering its substantial investment, DeepSeek remains significantly cheaper than its competitors.