DeepSeek’s AI Model Costs $1.6 Billion, Not $5.5 Million

DeepSeek, the Chinese AI startup, recently sparked controversy in the AI industry by claiming that its R1 model was trained for just $5.5 million.

However, a new report by SemiAnalysis suggests the actual costs are significantly higher—around $1.6 billion—and that DeepSeek has access to 50,000 Nvidia GPUs.

The $5.5 Million Claim vs. Reality

DeepSeek’s initial claim about the costs of developing its Mixture-of-Experts model sent Nvidia’s stock plummeting by $600 billion.

The $5.5 million figure seemed too low compared to the vast investments by major AI companies.

According to SemiAnalysis, the true investment includes $944 million in operating costs and over $500 million on GPUs alone.

DeepSeek’s GPU Power

The firm has access to a huge array of Hopper GPUs, including 10,000 H800s and 10,000 H100s, along with H20s for Chinese-specific operations.

These GPUs are shared with High-Flyer, a quantitative hedge fund backing DeepSeek, distributed across multiple locations for trading, research, and training.

Talent and Data Centers

DeepSeek exclusively hires talent from China and offers salaries up to $1.3 million for top candidates.

Unlike other tech giants, DeepSeek runs its own data centers, giving it more control and flexibility for AI development.