European tech startups are turning to China’s DeepSeek AI model to catch up in the global artificial intelligence race, leveraging its cost-effective solutions to compete with U.S. counterparts.
Hemanth Mandapati, CEO of German startup Novo AI, recently switched from OpenAI’s ChatGPT to DeepSeek’s chatbot. “If you have built your application using OpenAI, you can easily migrate to the other ones… it took us minutes to switch,” he said during the GoWest conference for venture capitalists in Gothenburg, Sweden.
DeepSeek’s emergence is reshaping the AI landscape, offering companies access to advanced technology at a fraction of the cost. Interviews with over a dozen startup executives and investors reveal that DeepSeek’s affordable pricing is a potential game-changer, pushing other AI firms to improve their models and lower prices.
“There was an offer from DeepSeek which was five times lower than their actual prices,” Mandapati noted. “I am saving a lot of money, and users don’t see any kind of difference.”
European tech startups have struggled to adopt new AI technology at the same pace as U.S. rivals, partly due to less access to funding. Executives believe DeepSeek could help level the playing field. “It marks a significant step forward in democratizing AI and leveling the playing field with Big Tech,” said Seena Rejal, chief commercial officer of British firm NetMind.AI, another early adopter of DeepSeek.
Analysts at Bernstein estimate that DeepSeek’s pricing is 20 to 40 times cheaper than equivalent models from OpenAI. OpenAI charges $2.50 for 1 million input tokens—units of data processed by the AI model—while DeepSeek currently charges just $0.014 for the same amount.
According to PitchBook data, venture capitalists invested nearly $100 billion in U.S. AI companies in 2023, compared with about $15.8 billion in Europe. Investment in Europe has been more modest.
Only France’s Mistral appears among the top foundational model developers in Europe, a list otherwise dominated by OpenAI, Meta, Anthropic, and Google.
China’s DeepSeek gained attention after revealing in a research paper last month that training its DeepSeek-V3 model required less than $6 million worth of computing power from Nvidia H800 chips. It has since overtaken ChatGPT to become the top-rated productivity app on Apple’s App Store.
“This is a wake-up call that bigger isn’t always better,” said Fabrizio Del Maffeo, CEO of Axelera AI. “By making models more attainable to everyone, the total cost of ownership and barriers to building innovative tech are lowered, which can be a catalyst for the whole industry.”
While some analysts question whether DeepSeek’s training costs are as low as claimed, they agree they are significantly lower than those of comparable American models. “I see DeepSeek as a tremendous opportunity for companies like ours,” said Ulrik R-T, CEO of Denmark’s Empatik AI. “It showed that we do not need huge budgets to achieve our vision.”
The price war may have already begun. Last week, Microsoft made OpenAI’s o1 reasoning model available to all Copilot users for free, instead of the usual $20-per-month subscription fee.
