AI is advancing at a breakneck pace, with new models emerging faster than ever. But with each breakthrough comes big questions: Who controls this technology? How is it being used? And should we trust it? One of the latest entries into the AI race is DeepSeek. It is a controversial model from China. DeepSeek promises state-of-the-art performance. The performance comes at a fraction of the usual cost. But is it a game-changer, or is it a potential security threat? Let’s dive in.

What is DeepSeek?

DeepSeek is a large language model (LLM). It is a type of AI trained to generate human-like text based on vast data. These models analyze enormous datasets to generate responses, write code, and even assist in research and automation. LLMs are transforming industries, from customer service automation to scientific breakthroughs. DeepSeek’s claim to fame? A high-performing model that’s both cost-effective and (supposedly) open-source.

Who Created DeepSeek?

DeepSeek was developed by a Chinese AI company. This company was founded in July 2023 by Liang Wenfeng. He also heads High Flyer, a hedge fund specializing in algorithmic trading. High Flyer is known for using AI-driven strategies to predict and profit from stock market movements. With DeepSeek’s sudden rise and its impact on financial markets, questions have arisen. Was its release driven purely by AI innovation? Alternatively, was it a strategic financial play as well?

Why is DeepSeek Significant?

What sets DeepSeek apart is its cost-efficiency and accessibility. The company claims that its r1 model was trained for just $5.5 million, a fraction of the estimated $100 million OpenAI reportedly spent on training GPT-4. If true, this suggests that cutting-edge AI could be developed at a far lower cost. This would make it more accessible to smaller companies and nations outside the current AI powerhouses.

Beyond its language model capabilities, DeepSeek’s AI is already being integrated into major industries. In China’s automotive sector, companies like BYD, Geely, and Great Wall Motors are embedding DeepSeek’s r1 reasoning model. They are integrating it into their vehicles. This enhances features like automatic parking and highway navigation. This signals a push toward AI-powered autonomous driving beyond just Tesla and Western automakers.

However, DeepSeek’s rapid adoption also brings concerns. The model operates under China’s strict AI regulations, meaning it must comply with government censorship laws. This development has caused worries about data privacy. There are also issues regarding government access to AI-generated insights. Additionally, there are broader geopolitical implications as AI becomes a tool of influence.

What’s the Deal with DeepSeek?

DeepSeek stormed onto the scene with powerful models and aggressive pricing. But the excitement has been met with just as much skepticism. Let’s break it down.

The Good: Why DeepSeek Got Attention

State-of-the-Art Performance

DeepSeek offers two key models:

• v3 Transformer Model – Optimized for speed and efficiency.
• r1 Reasoning Model – Designed for complex problem-solving.

At launch, both models ranked among the top three globally, making DeepSeek a real competitor in the AI space.

Secure Hosting Options in the U.S.

To address security concerns, U.S. companies like Microsoft, Perplexity, and AWS have started hosting DeepSeek models. These versions process data on the U.S. or other secure-region servers, removing censorship and questionable data-sharing practices. If you’re considering DeepSeek, these versions are the only ones worth looking at.

Why does this matter? These versions remove some risks. However, they still rely on DeepSeek’s core model. This means security concerns may not be fully eliminated.

The Bad: Major Red Flags

Misleading Cost & Open Source Claims

DeepSeek claimed its r1 model was trained for just $5.5 million, an industry-shaking figure. But AI experts, including Google DeepMind CEO Demis Hassabis, have debunked this claim. That number only covered the final training round—not the full development cost.

Then there’s the open-source claim. DeepSeek released its model weights under an MIT license. However, it doesn’t provide full access to its training data. It also doesn’t meet the Open Source Initiative’s definition of true open-source software.

Why does open source matter? True open-source models allow developers to inspect, modify, and improve the AI system, ensuring transparency and reducing risks. Without full access, users can’t verify how the model was built or what data it was trained on.

Data Privacy Risks

Using DeepSeek—via its API, website, or mobile app—means all your data goes straight to DeepSeek, with no real opt-out. This raises several issues:

• Sensitive Information Exposure – Anything you input could be accessed by the Chinese government under local data laws.
• Heavy Censorship – Out-of-the-box DeepSeek won’t engage with politically sensitive topics like human rights in China. U.S.-hosted versions have removed some of these restrictions, but the core model is built with censorship in mind.

National Security Concerns & Global Bans

Many governments worry that AI models developed in China could be used for espionage. They might also be used for misinformation campaigns or data surveillance. This is leading to strict regulations. DeepSeek is now facing scrutiny worldwide:

• Europe: Italy banned DeepSeek over GDPR violations.
• Asia-Pacific: Taiwan, Australia, and South Korea have restricted its use in government sectors.
• United States: Agencies like the Pentagon and NASA have banned DeepSeek from official devices. State governments in Texas and New York have also imposed bans.

On February 10, a bill was introduced. The bill would impose $100 million fines on companies. It would also impose $1 million fines on individuals for using any Chinese AI models, including DeepSeek. While unlikely to pass in its current form, this signals increasing regulatory pressure.

Market Impact & Security Concerns

DeepSeek’s launch didn’t just make waves—it rocked financial markets. The claim of low training costs triggered an immediate sell-off in U.S. tech stocks, particularly NVIDIA.

Why did investors panic? If DeepSeek’s claim of training a high-performing model for only $5.5 million were true, it could dramatically lower the costs of AI development, disrupting the industry. Companies like NVIDIA rely on AI hardware sales. Their stock prices dropped as investors questioned whether expensive AI chips were still necessary.

Other security concerns include:

• Massive Download Surge – The DeepSeek app became the most downloaded free app on iOS, hitting 10+ million downloads overnight.
• Security Breaches – A database leak exposed over 1 million chat logs, API keys, and confidential user data.
• Encryption & Jailbreak Risks – Researchers found outdated 3DES encryption, a 100% jailbreak vulnerability, and device fingerprinting threats.

The Verdict: AI Breakthrough or National Security Risk?

DeepSeek made a splash by promising affordability, accessibility, and performance. But as the dust settles, the concerns are outweighing the hype.

Key Takeaways

• Not Open Source – DeepSeek isn’t truly open source, despite its claims.
• No Real Data Privacy Protections – User data is stored in China and can be accessed by its government.
• Market & Security Risks – From financial volatility to censorship, the risks are significant.
• Regulatory Crackdowns Are Coming – U.S. lawmakers and international regulators are already taking action.

Before adopting AI models like DeepSeek, companies, and individuals should weigh the risks. Is the cost savings worth potential security vulnerabilities? Is the model transparent enough to trust with sensitive data? The AI landscape is evolving rapidly, and informed decision-making will be crucial in the years ahead.

Stay informed. Be skeptical. And always dig deeper before adopting new AI technologies.