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š» Did DeepSeek dethrone OpenAI?
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If you take just one thing from this emailā¦
The breakthrough of DeepSeek (an AI chatbot) is challenging the belief that AI models require ultra-powerful chips and massive investment. Its open-source approach and low development costs could shake up industries (including legal tech) by making AI tools cheaper to build. But privacy concerns ā especially around data stored in China ā may limit its adoption in law firms, which are highly cautious about confidentiality and security.
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š» Did DeepSeek dethrone OpenAI?
Whatās going on here?
Chinese startup DeepSeek launched its free AI-powered chatbot assistant last week.
Experts are saying itās almost as good as OpenAIās top model. It performed well in maths, coding, and reasoning tasks.
Since its launch, itās become the top-rated free app on Appleās App Store in the US and UK.
But DeepSeek had to temporarily stop new user registrations after a large-scale cyberattack. The source of the attack isnāt known, but the companyās recent media attention may have made it a target.
Where did DeepSeek come from?
DeepSeek was founded in 2023 by Chinese entrepreneur Liang Wenfeng. Itās funded by profits from his hedge fund, High-Flyer Capital (which uses AI to predict stock performance).
Liang Wenfeng
Unlike other startups, DeepSeek focuses purely on research ā not making money.
Plus, DeepSeek is also offering some of the highest salaries to AI engineers in China, to attract the countryās top talent.
Why is DeepSeek such a big deal?
š«° Lower cost of building AI: DeepSeek claims their AI was developed using Nvidiaās H800 chips, which are far less powerful than the H100 chips used by competitors. The US stopped exporting the H100 chips to China since September 2022 to try to slow Chinaās tech growth.
Because of this, DeepSeekās AI model reportedly cost only $5.6 million to train ā a tiny fraction of what competitors spend (Microsoft plans to invest about $80 billion in AI infrastructure this year).
If true, this challenges a key belief in Silicon Valley: that building top AI products requires ultra-powerful chips and hundreds of millions of dollars in investment.
š The news about DeepSeekās cost shook the stock market. The Nasdaq fell 3% on Monday, erasing $1 trillion in value. Nvidia, the top AI chipmaker, fell 17% ā the biggest one-day loss in US history. Investors worry AI may no longer need its most advanced chips.
š§āš» Open-source code: Liang Wenfeng believes AI should be āaffordable and accessible to everyone.ā So, DeepSeek has made its AI code freely available (its competitors havenāt done this). This means developers can use, modify, and improve it as they want, making AI innovation much easier.
Are there any concerns?
Yes, two big ones.
š Privacy: Unless users download and run the software locally, any data entered into the model is stored on Chinese servers. So, data from international users could flow to China. DeepSeek says the data will be used to ācomply with its legal obligations.ā But Chinaās laws allow its government to demand access to data from tech companies, potentially for national intelligence purposes.
š« Censorship: AI companies in China must ensure their products follow the Chinese Communist Partyās āsocialist values.ā Because of this, DeepSeek may provide different answers to politically sensitive questions compared to US-based chatbots like ChatGPT. For example, when asked about human rights abuses in Xinjiang ā where Chinaās government has reportedly detained over a million members of a Muslim minority group ā DeepSeekās response differs from ChatGPTās:
Why should law firms care?
š Cheaper to develop, easier to deliver: DeepSeekās lower development costs show that legal tech doesnāt have to cost billions. Currently, legal AI tools license their models from AI companies ā Harvey, for example, is built on GPT-4 from OpenAI. DeepSeekās open-source approach could make it cheaper to build AI legal tools, sparking innovation and allowing smaller players to enter the market.
āļø Driving down legal service costs: With better, more accessible tools, law firms can (in theory) work faster and more efficiently. This might drive down legal service costs, as clients expect those savings to be passed on. Firms that adopt these tools early could improve their reputation among clients while meeting growing demands for affordable services, giving them a competitive edge in the market.
ā ļø Data security and privacy concerns: DeepSeek stores user data on servers in China, which will concern lawyers (a lot of firms have been leaving China). Law firms are notoriously risk-averse, so these issues will have to be addressed if DeepSeek is going to be used in the legal industry. Harvey (which a lot of law firms use) avoids this problem by ensuring client data is never used for training its AI and offering security measures tailored to law firmsā strict confidentiality requirements.
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