Ignacio Teson•Wednesday, January 29, 2025•1 min read
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The rise of DeepSeek has intensified competition in China’s AI sector, challenging both domestic tech giants and leading Silicon Valley firms.
On Wednesday, Chinese tech giant Alibaba introduced a new version of its AI model, Qwen 2.5, asserting that it outperforms the highly regarded DeepSeek-V3. As a result, Alibaba’s stock surged nearly 2% on Wall Street.
The timing of the Qwen 2.5-Max launch, coinciding with the first day of the Lunar New Year—a time when most Chinese are on holiday with their families—highlights the pressure brought by DeepSeek’s meteoric rise over the past three weeks. This surge has not only impacted foreign competitors but also intensified the race among domestic AI firms.
“Qwen 2.5-Max surpasses GPT-4o, DeepSeek-V3, and Llama-3.1-405B in almost every aspect,” Alibaba’s cloud division stated in an official WeChat announcement, referencing leading AI models from OpenAI and Meta.
DeepSeek and AI Competition
DeepSeek’s AI assistant launch on January 10, powered by DeepSeek-V3, along with the release of its R1 model on January 20, has sent shockwaves through Silicon Valley, causing declines in tech stocks. DeepSeek’s alleged cost efficiency in development and deployment has raised investor concerns about the massive spending plans of major U.S. AI companies.
However, DeepSeek’s success has also sparked fierce competition among Chinese AI rivals. Just two days after the DeepSeek-R1 launch, ByteDance—the parent company of TikTok—rolled out an upgrade to its flagship AI model, claiming it outperformed OpenAI’s Microsoft-backed o1 model in AIME, a benchmark test evaluating AI models’ ability to understand and respond to complex instructions.
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
