Chinese AI startup DeepSeek has made significant strides in the artificial intelligence sector, challenging the dominance of Silicon Valley's AI elite with its cost-effective and efficient AI models. DeepSeek's latest model, R1, has been released with capabilities that reportedly match those of leading models like OpenAI's GPT-4 but at a fraction of the cost and computational power. This development has prompted major Chinese tech companies such as Baidu, Alibaba, and ByteDance to shift towards open-source strategies and lower-cost models to remain competitive. Baidu announced that its next-generation Ernie LLM, Ernie 4.5, will be open source from June 30, while Alibaba's Qwen 2.5-Max model has been claimed to surpass DeepSeek-V3 in functionality. ByteDance's Doubao chatbot, with 30 million daily active users, is the most popular consumer AI app in China. DeepSeek's approach has also led to increased competition within China, with companies like Tencent launching its Hunyuan model and startups like Moonshot with its Kimi 1.5 model, and 01.AI adopting similar strategies using the mixture of experts (MoE) framework. Additionally, Zhipu AI's GLM4 and Minimax's MoE model have been noted for their performance, while Baichuan has gained recognition for being the first in China to launch an open-source model. The impact of DeepSeek extends beyond China, prompting discussions in Europe and the United States about AI strategy and innovation.