By Björn Jeffery, SvD Tech Brief. Published in Svenska Dagbladet on 19 January 2025.
Countless billions have been spent by tech giants to develop the best AI models. Now the next era is beginning — with budget versions from China that are completely changing the rules of the game.
“Have you got a Panadol?” Ever since paracetamol was launched in Sweden in 1958, the brand has remained synonymous with painkillers. Competitors like Ibuprofen have tried to challenge that image with the help of amusing advertising.
But it helps to be first to market, to have a well-known brand, or a reputation for being the best. All three at once is, of course, even better.
The young AI industry is in a similar position. Microsoft has invested over 145 billion kronor in OpenAI to stay at the absolute cutting edge — and to be both first and best. The rather square name ChatGPT has, somewhat unexpectedly, become the most well-known name for an AI product so far. But that could change quickly.
There is much to suggest that the market for AI products is now facing a major transformation. Like industries such as fashion, pharmaceuticals, and interior design, it will become broader — and substantially cheaper. And as in many other industries, it is China that is driving the development.
One new AI model has brought the question into sharp focus. Chinese DeepSeek V3 has only existed since December last year, but has already attracted a great deal of attention. The reason is not primarily that it is good — though in benchmarks it holds its own admirably against models from OpenAI, Meta, and Google. No, the reason for the attention is that it was extraordinarily cheap to build. It cost under six million dollars and took two months to put together — a pittance compared to the billions invested in today’s market leaders. Former Tesla AI chief Andrej Karpathy noted that DeepSeek should have needed at least eleven times more computing power to achieve these results.
As is often the case, the Chinese version closely resembles the original. DeepSeek looks and functions, in all essential respects, exactly like ChatGPT.
There may be a logical explanation for this.
When TechCrunch asked DeepSeek which AI model it had used, it answered that it was ChatGPT. No explanation for this obvious confusion has been given, but a fairly safe guess is that they copied material from their Western competitor in some way.
Regardless of the method — and however well that squares with copyright law — DeepSeek will have major implications for the AI market. A new category has emerged: so-called “fast followers.” Like H&M and Zara in the fashion world, they take inspiration from leading brands and produce their own version that sells quickly and cheaply. They are rarely the best, but as long as they are good enough, there are plenty of customers for this segment too.
The change may further polarise AI development. A fast follower has neither the ambition nor the resources to advance the category further. The major technical breakthroughs will therefore not come from here. On the contrary, more time and money than ever may need to be invested in creating a clear distinction between the leading AI models and everything else on the market. The most advanced version of ChatGPT currently costs around 2,200 kronor a month for users. Why would anyone pay that if a much cheaper version is almost as good?
DeepSeek itself is moreover built on open source code — like Meta’s Llama model — and is therefore free to use. But as with many free products, there is still a kind of cost. When you ask the Chinese AI model what happened at Tiananmen Square in 1989, it simply replies that “unfortunately this falls outside my current knowledge. Let’s talk about something else.” Chinese companies must comply with Chinese laws, even when users in Sweden are asking the questions.
Despite these obvious drawbacks, a clear and new direction for the AI market can be discerned. The barriers to entry just dropped significantly. What was once a business requiring billions in resources from the world’s largest companies has now made highly capable models available to the general public. Curious businesses can experiment at very low cost and achieve results that would have seemed incredible just a year ago. That is how fast this market is moving.
Keeping pace with AI development will still be a challenge. But now it is at least not your wallet that determines whether you can try.
