The release of DeepSeek's R1 models in January 2025 disrupted the AI market, resulting in a staggering $593 billion selloff in Nvidia's market cap.

01.AI plans to customize DeepSeek models for clients in various sectors, including finance, gaming, and legal, despite the challenges posed by this new strategy.

Lee asserts that the AI industry is consolidating around a few foundational models, predicting that open-source solutions will ultimately dominate the market.

In a recent Bloomberg interview, Lee remarked that competitors like OpenAI were 'shocked' by the performance of DeepSeek's models, which operate at a significantly lower cost.

Lee questions the long-term viability of OpenAI's business model in light of competition from more affordable open-source alternatives, suggesting uncertainty for its CEO, Sam Altman.

DeepSeek's commitment to open-sourcing five key code repositories marks a notable shift towards transparency, contrasting sharply with OpenAI's closed-source strategy.

Kai-Fu Lee, the former head of Google China and founder of AI startup 01.AI, is pivoting his company to focus on DeepSeek's open-source models, which he views as a significant threat to OpenAI's business model.

Lee contrasts the operational costs of OpenAI, which reached $7 billion in 2024, with DeepSeek's significantly lower expenses, reportedly only about 2% of OpenAI's costs.

He believes that DeepSeek's free, open-source approach is challenging OpenAI, as many users are reportedly canceling their ChatGPT subscriptions in favor of DeepSeek's offerings.

Prominent figures like Elon Musk and Mark Zuckerberg are advocating for open-source AI development, further supporting Lee's perspective on the industry's shift towards transparency.

Despite the rising competition from open-source models, OpenAI's ChatGPT continues to thrive, boasting over 400 million weekly active users as of February 2025, reflecting a 33% increase since December 2024.

The decision to shift focus to DeepSeek was driven by increasing demand from Chinese CEOs for its models, highlighting a shift in market preferences.