They’ve invested billions on their models and infrastructure, which they need to recover through revenue
If new exponentially cheaper models/services come out fast enough, the incumbent might not be able to recover their investments
Right now, DeepSeek is destroying on price and provides somewhat equivalent value compared to Sonnet. I still believe Sonnet is better, but I don't think it is 10 times better.
Something else that DeepSeek can do, which I am not saying they are/will, is they could train on questionable material like stolen source code and other things that would land you in deep shit in other countries. DeepSeek just needs to improve the value and I can see them destroying Anthropic since I believe coding is their main focus.
When it comes to text processing, I personally find GPT to be much better and that might also have to do with allegations that they trained on literature that they should not have.
I don't think that's true.
There's no scenario where training on the entire public internet is deemed fair use but training on leaked private code is not, because both are ultimately the same thing (copyright infringement allegations)
And it's not even something I just made up, the law explicitly says it:
"The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors."[0]
My rational is we are dealing with a commodity product. People will go where the best answer is. I only use DeepSeek because it is good. If it was free, but sucked, I would not use it.
Honestly, I do hope they (OpenAI) offer a better product but as it currently stands, I will not use their models because they don't offer enough value for the price.
Sonnet doesn't need to be 10 times better. It just needs to be better enough such that the downstream task improves more than the additional cost.
This is a much more reasonable hurdle. If you're able to improve the downstream performance of something that costs $500k/year by 1% then the additional cost of Sonnet just has to be less than $5k/year for there to be positive ROI.
I'm a big fan of DeepSeek. And the VC funded frontier labs may be screwed. But I don't think R1 is terminal for them. It's still a very competitive field.
I hope not, as I we need more competition.
It doesn’t help if you have a cheap model if you don’t have the infrastructure to run it at a large scale, and the integrations that help pull in regular mass market consumers.
The other companies will just copy, and possibly surpass the breakthrough in efficiency. And now they’ve got an efficient model AND the infrastructure and expertise to deploy it at a huge scale very rapidly.
This month it’s Deepseek that’s ahead. Next month it will be someone else. Haven’t we learned that by now?
It makes all the difference when they also know 90% of their capex is worthless. Obviously hyperbole, but grossly over valued for what was originally scaled. And with compute infra depreciating 3-5 years, it doesn't matter whose ahead next month, if what they're actually ahead in is massive massive debt due to loss making infra outlays that will never return on capita because their leading model now can only recoop a fraction of that after open source competitors drove prices down for majority of good enough use cases. The lesson one should learn is economics 101 still applies. If you borrow billions on a moat, and 100s of billions on a wall, but competitors invent a canon, then you're still potentially very dead, just also very indebt while doing so.