DeepSeek's Theoretical Profit Margins Raise Eyebrows

Chinese AI startup DeepSeek has made headlines by claiming a theoretical profit margin of 545% for its AI models, as shared in a recent post on X. The company detailed that this margin is based on the potential income from its V3 and R1 models if all usage were billed at R1 pricing over a 24-hour period. However, DeepSeek acknowledged that actual revenues are significantly lower due to factors such as nighttime discounts, lower pricing for the V3 model, and the fact that only a subset of services are monetized.

The startup, which has gained attention for its innovative and cost-effective AI models, emphasized that these profit margins are hypothetical and do not account for all research and development expenses. Despite the speculative nature of these figures, the announcement comes at a time when the profitability of AI startups is a hot topic among investors. DeepSeek's approach contrasts with the proprietary models of its US counterparts, as it has shared key innovations and data underpinning its models, contributing to ongoing debates about AI's cost and potential profitability.