DeepSeek: How a Chinese AI Startup is Disrupting Big Tech 🤖

Hey there! 👋

A new AI chatbot from Chinese startup DeepSeek has taken the tech world by storm. It has become the most downloaded free iOS app in the US since its launch and is causing unprecedented market fluctuations.

Let’s dive into what happened and how law firms could be affected.

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Why does it matter? 🤨

DeepSeek was founded in 2023 by Liang Webfeng. It has created an AI model comparable to OpenAI’s top offerings at a fraction of the cost. Their chatbot reportedly cost only $5.6 million to train, compared to the $100+ million spent on GPT-4.

• The company built their model using modified H800 chips, which highlighted its ability to work within technological constraints.

• Deepseek has also made its code open-source. This means developers worldwide can examine and improve upon their work.

• Perhaps most dramatically, DeepSeek sent shockwaves across the financial markets. Their success story caused Nvidia to lose nearly $600 billion in market value in a single day - the largest one-day loss in US stock market history.

• What's particularly interesting is that DeepSeek isn't primarily focused on only making money. Funded by profits from Wenfeng's hedge fund, High-Flyer Capital, the company prioritises research over commercialisation.

How does this impact businesses? 💼

Think about what happens when something expensive suddenly becomes affordable. That's what DeepSeek might do for AI. They've basically shown that you don't need to be Google or Microsoft to build impressive AI systems. By showing that AI can be built without massive resources, DeepSeek is potentially opening the door for smaller companies to enter the market and innovate. This could lead to a more diverse and competitive AI ecosystem.

There's also an interesting environmental angle here. Current AI systems are energy hogs - ChatGPT alone produces as much CO2 per month as 260 flights from London to New York. DeepSeek's more efficient approach could help make AI more environmentally friendly or at least push for more sustainable AI practices.

Since DeepSeek is based in China, there are some pretty big questions about data privacy. When you use their chatbot, your data may get stored on Chinese servers, which operate under very different rules than those in the West. Plus, Chinese tech companies have to follow strict government guidelines about content - so the answers you get might be different from what you'd get from ChatGPT.

How are law firms affected? ⚖️

DeepSeek’s breakthrough could affect how law firms approach legal technology. Its open-source model and significantly lower development costs could enable firms to create customised AI tools tailored to their specific practice areas and client needs. This could be particularly transformative for smaller and mid-sized firms that have traditionally been priced out of advanced legal tech.

The cheaper and more efficient AI tools could also affect client expectations around legal service delivery and pricing. As these technologies become more cost-effective, clients may increasingly expect law firms to leverage AI to pass on these savings to them.

However, there are significant privacy concerns. Law firms have strict obligations to protect client confidentiality, and storing sensitive legal data on Chinese servers raises serious ethical and professional concerns. The Chinese government's ability to access data under national security creates significant compliance risks under various data protection regulations.

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I hope you enjoyed this article. See you next week! 👋

Written by Chirag Morar