Open-source models and fresh funding: China’s AI start-ups scramble to respond to DeepSeek

Hangzhou-based DeepSeek has dominated the spotlight in China’s AI arena at the expense of local peers such as Moonshot and MiniMax

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DeepSeek’s presence looms large in China’s nascent artificial intelligence industry. Photo: Reuters

Published: 7:00am, 6 Mar 2025Updated: 6:58pm, 7 Mar 2025

DeepSeek sent shock waves across China’s artificial intelligence (AI) community after its low-cost models upended conventional thinking in the industry, prompting other start-ups to launch open-source models and seek fresh funding.

A spin-off from a hedge fund owned by Liang Wenfeng, DeepSeek grabbed headlines for its impact on Wall Street and Silicon Valley. The Hangzhou-based start-up has also dominated the spotlight in China’s AI arena at the expense of local peers such as Moonshot AI and MiniMax.

In July 2024, when DeepSeek released its V2 model that triggered a price war in China’s AI market, Liang said in an interview that the company had “accidentally” become the “catfish” in the industry, as it did not intend to disrupt the sector. But when DeepSeek released V3 last December and R1 in January this year, the firm raised existential questions for many players in China’s crowded AI model market.

DeepSeek’s disruption, however, appears to have given China “the edge” in terms of strong AI model capabilities and democratising access to the technology for more companies to pursue further innovation.

“Before DeepSeek’s R1, many [Chinese AI start-ups] were starting to pivot and focus on consumer-facing applications, driven by the same monetisation strategy in the mobile internet era,” said AI analyst Grace Shao, founder of industry newsletter AI Proem. “Meanwhile, in the US, AI has been largely diffused as a way to empower enterprises and white-collar productivity.”

Shao pointed out that the divergent approaches are caused by structural economic differences between the US and China markets. She added that strong model capabilities remain the foundation of the AI industry.