On today’s episode of Decoder, we’re talking about the only thing the AI industry — and pretty much the entire tech world — has been able to talk about for the last week: that is, of course, DeepSeek, and how the open-source AI model built by a Chinese startup has completely upended the conventional wisdom around chatbots, what they can do, and how much they should cost to develop.

DeepSeek, for those unaware, is a lot like ChatGPT — there’s a website and a mobile app, and you can type into a little text box and have it talk back to you. What makes it special is how it was built. On January 20th, the startup’s most recent major release, a reasoning model called R1, dropped just weeks after the company’s last model V3, both of which began showing some very impressive AI benchmark performance. It quickly became clear that DeepSeek’s models perform at the same level, or in some cases even better, as competing ones from OpenAI, Meta, and Google. Also: they’re totally free to use.

But here’s the real catch: while OpenAI’s GPT-4 reported training cost was as high as $100 million, DeepSeek’s R1 cost less than $6 million to train, at least according to the company’s claims. In a matter of days, DeepSeek went viral, becoming the No. 1 app in the US, and on Monday morning, it punched a hole in the stock market.

Panicked investors wiped more than $1 trillion off of tech stocks in a frenzied selloff earlier this week. Nvidia, in particular, suffered a record stock market decline of nearly $600 billion when it dropped 17 percent on Monday.

For more than two years now, tech executives have been telling us that the path to unlocking the full potential of AI was to throw GPUs at the problem. Since then, scale has been king. And scale was certainly top of mind less than two weeks ago, when Sam Altman went to the White House and announced a new $500 billion data center venture called Stargate that will supposedly supercharge OpenAI’s ability to train and deploy new models.

The aftermath has been a bloodbath, to put it lightly. Venture capitalist Marc Andreessen sounded the alarm, calling DeepSeek “AI’s Sputnik moment” — and that does appear to be how the AI industry and global financial markets are treating it.

In DeepSeek and Stargate, we have a perfect encapsulation of the two competing visions for the future of AI. One is closed and expensive, and it requires placing an ever-increasing amount of money and faith into the hands of OpenAI and its partners. The other is scrappy and open source, but with major questions around the censorship of information, data privacy practices, and whether it’s truly as low-cost as we’re being told.

What is clear is that we’ve entered a new phase in the AI arms race, and DeepSeek and Stargate represent more than just two distinct paths toward superintelligence: they also represent a new, escalating front in the US-China relationship and the geopolitics of AI. This is becoming especially fraught, as President Donald Trump continues to wreak havoc on foreign relations with a new threat of tariffs on foreign semiconductors.

There is a whole lot going on here — and the news cycle is moving very fast. So to break it all down, I invited Verge senior AI reporter Kylie Robison on the show to discuss all the events of the past couple weeks and to figure out where the AI industry is headed next.

If you’d like to read more about what we talked about in this episode, check out the links below: