The Banking Executive Magazine - February 2025 Issue

the BANKING EXECUTIVE 48 ISSUE 193 JANUARY 2025 FinTech and AI Chornicle The Chinese startup triggered a $1 trillion-plus sell-off in global equities markets last month with a cut-price AI reasoning model that outper- formed many Western competitors. Now, the Hangzhou-based firm is accelerating the launch of the suc- cessor to January's R1 model, ac- cording to three people familiar with the company. Deepseek had planned to release R2 in early May but now wants it out as early as possible, two of them said, without providing specifics. The company says it hopes the new model will produce better coding and be able to reason in languages beyond English. Details of the accel- erated timeline for R2's release have not been previously reported. DeepSeek did not respond to a re- quest for comment for this story. Rivals are still digesting the implica- tions of R1, which was built with less-powerful Nvidia chips but is competitive with those developed at the costs of hundreds of billions of dollars by U.S. tech giants. "The launch of DeepSeek's R2 model could be a pivotal moment in the AI industry," said Vijayasimha Alilughatta, chief operating officer of Indian tech services provider Zensar. DeepSeek's success at creating cost- effective AI models "would likely spur companies worldwide to accel- erate their own efforts ... breaking the stranglehold of the few dominant players in the field," he said. R2 is likely to worry the U.S. government, which has identified leadership of AI as a national priority. Its release may further galvanize Chinese authorities and companies, dozens of which say they have started integrating DeepSeek models into their prod- ucts. Little is known about DeepSeek, whose founder Liang Wenfeng became a billionaire through his quantitative hedge fund High-Flyer. Liang, who was de- scribed by a former employer as "low-key and introverted," has not spoken to any media since July 2024. Reuters interviewed a dozen former employees, as well as quant fund professionals knowledgeable about the operations of DeepSeek and its parent company High-Flyer. It also reviewed state media articles, social- media posts from the companies and research papers dating back to 2019. DEEPSEEK RUSHES TO LAUNCH NEW AI MODEL AS CHINA GOES ALL IN