Hemanth Mandapati, the head of German startup Novo AI, recently adopted DeepSeek chatbots. He made the switch from OpenAI’s ChatGPT just two weeks ago.
“If you have built your application using OpenAI, you can easily migrate to the other ones … it took us minutes to switch,” he stated in an interview during the GoWest conference for venture capitalists in Gothenburg, Sweden.
DeepSeek’s rise is transforming the AI landscape. It provides companies with access to technology at a significantly lower cost, according to interviews with over a dozen startup executives and investors. This development could compel other AI companies to enhance their models and reduce prices.
Mandapati mentioned, “There was an offer from DeepSeek which was five times lower than their actual prices. I am saving a lot of money and users don’t see any kind of a difference.”
European tech startups have faced challenges in adopting new technology as quickly as their U.S. counterparts, who benefit from easier access to funding. However, executives believe DeepSeek could change this dynamic.
Seena Rejal, chief commercial officer of British firm NetMind.AI, remarked, “It marks a significant step forward in democratising AI and levelling the playing field with Big Tech.”
Analysts at Bernstein estimate that DeepSeek’s pricing is 20 to 40 times cheaper than similar models from OpenAI.
OpenAI charges $2.5 for 1 million input tokens, while DeepSeek currently charges only $0.014 for the same amount.
Regulators have raised concerns about whether DeepSeek is copying OpenAI data or censoring responses that could negatively portray China. The company is currently under investigation in several European countries.
Sanjot Malhi, a partner at venture capital firm Northzone, noted, “While the future of DeepSeek as a business is difficult to predict, the structural impact seems quite pervasive.”
Venture capitalists invested nearly $100 billion in the U.S. AI companies in 2024, compared to approximately $15.8 billion in Europe, according to PitchBook data.
On January 22, U.S. President Donald Trump announced a $500 billion AI project called Stargate. This joint venture is backed by OpenAI, SoftBank, and Oracle.
In contrast, investment in Europe has been more limited.
France’s Mistral is the only European company among the leading foundational models, which are primarily dominated by OpenAI, Meta, Anthropic, and Google.
DeepSeek gained attention after revealing in a paper last month that training its DeepSeek-V3 model required less than $6 million in computing power from Nvidia H800 chips. The model has since surpassed ChatGPT to become the top-rated productivity application on Apple’s App Store.
Fabrizio Del Maffeo, CEO of Axelera AI, stated, “This is a wake-up call that bigger isn’t always better.” He emphasized that making models more accessible lowers the total cost of ownership and reduces barriers for innovative tech development.
While some analysts question whether DeepSeek’s training costs are as low as claimed, they agree that the costs are lower than those of comparable American models.
Ulrik R-T, CEO of Denmark’s Empatik AI, expressed, “I see DeepSeek as a tremendous opportunity for companies like ours. It showed that we do not need huge budgets to be able to achieve our vision.”
COST AND SAFETY
The price competition in the AI market may have already begun.
Last week, Microsoft released OpenAI’s o1 reasoning model to all Copilot users for free, rather than charging the usual subscription fee of $20 per month.
Joachim Schelde of Scale Capital noted, “AI prices are going down, so future usage is probably going where there is transparency, which is usually open source, even though it’s in China.”
Larger companies, such as Finland’s Nokia and Germany’s SAP, are more cautious about making the switch.
Alexandru Voica, Head of Corporate at Britain’s Synthesia, which was last valued at $2.1 billion, explained, “Cost is just one factor. Other factors are: ‘do you have all the security certifications, the frameworks, the software ecosystem that allows companies to build and integrate with your platform?'”
Click here for more Technology news.