Last month, Chinese AI company DeepSeek unveiled two developments through its new model R1, quietly redefining the economics of artificial intelligence. It delivered top-tier performance at just 1/40th the cost of previous models, not long after the company’s V3 large language model, released in December, remarkably slashed training costs by more than 90%.
First, DeepSeek revealed that asking AI models to narrate their reasoning—an approach that researchers call chain-of-thought prompting—improved both accuracy and efficiency. Second, DeepSeek used AI to generate its own data sets, employing zero humans to label data. While there’s belief DeepSeek’s accomplishments did not come as cheaply as claimed, the advancements are still ushering in a new era of AI economics.
