These European startups benefit from sharp cost advantages DeepSeek. But there are also concerns

China's DeepSeek offers a cheaper alternative to OpenAI's popular AI models, such as ChatGPT. DeepSeek's success is very noticeable in Europe, where many startups struggle to access the technology due to limited funding. Unlike their U.S. counterparts, European companies can now take advantage of the lower costs.

One of the first companies to switch to DeepSeek is Novo AI, a German startup company led by Hemanth Mandapati. Mandapati indicates, to Reuters, that the transition was quick and easy. According to him, the switch took only a few minutes. Moreover, Mandapati indicated that DeepSeek's price offer was five times lower than that of other providers, saving him a lot of costs without any noticeable differences.

Fabrizio Del Maffeo, CEO of Axelera AI, also noted that larger models are not necessarily better. By significantly reducing the cost of AI models, DeepSeek lowers the threshold for companies to develop innovative technology, which can have a positive impact on the entire industry.

Sharp price differentials

The price advantage of DeepSeek is huge, according to analysts. Compared to OpenAI, which charges $2.5 for 1 million tokens processed, the same amount of data processed at DeepSeek costs only $0.014. These sharp price differences could have major implications for the AI industry, as companies can now access advanced AI models at a fraction of the cost.

Closing the gap with the US

For many European tech companies, DeepSeek presents an opportunity to close the gap with the U.S. market. While nearly $100 billion was invested in AI companies in the U.S. by 2024, it was only $15.8 billion in Europe. DeepSeek now offers an alternative for companies that normally cannot afford much in the way of AI development. According to Seena Rejal, the commercial director of UK-based NetMind.AI, DeepSeek is an important step toward democratizing AI and creating a more level playing field for smaller companies versus the big tech giants.

Controversy

However, the company is also facing controversy. There are concerns about the ethical and legal aspects of DeepSeek's technology. Regulators in several European countries are investigating whether DeepSeek may be copying OpenAI data or even censoring content that could potentially cast China in a negative light. These concerns are a topic of discussion within the industry, although the company itself says it does not copy OpenAI data.

Price drop a trend

Microsoft recently lowered the cost of OpenAI's Copilot model by making it available to users for free, instead of the usual subscription price of $20 per month. The price drop appears to be becoming a trend, with the expectation that companies will increasingly seek transparency in the future, which can often be found in open-source alternatives.

Large companies are more cautious

Although DeepSeek holds promise for startups and smaller companies, large companies such as Nokia and SAP remain more cautious. For them, price is only one factor in their decision to switch AI providers. Security certifications, integration capabilities, and a platform's broader software ecosystem play a bigger role.

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