China’s DeepSeek quietly releases an open-source rival to GPT-5—optimized for Chinese chips and priced to undercut OpenAI

AI·OpenAIChina’s DeepSeek quietly releases an open-source rival to GPT-5 — optimized for Chinese chips and priced to undercut OpenAIBy Sharon GoldmanBy Sharon GoldmanAI ReporterSharon GoldmanAI ReporterSharon Goldman is an AI reporter at Fortune and co- Eye on AI, Fortune’s flagship AI

She has written digital and enterprise for over a decade.SEE FULL BIO DeepSeek's new AI model is optimized for Chinese chips and priced to undercut OpenAI.Photo illustration by Cheng Xin—Getty ImagesChinese AI startup DeepSeek shocked the world in January with an AI model, called R1, that rivaled OpenAI and Anthropic’s top LLMs

It was built at a fraction of the cost of those other models, using far fewer Nvidia chips, and was released for free

Now, just two weeks after OpenAI debuted its model, GPT-5, DeepSeek is back with an to its flagship V3 model that experts say matches GPT-5 on some benchmarks—and is strategically priced to undercut it

DeepSeek’s new V3.1 model was quietly released in a message to one of its WeChat groups, China’s all-in-one messaging and social app, as well as on the Hugging Face platform

Its debut touches several of today’s biggest AI narratives at once

DeepSeek is a core part of China’s broader push to develop, deploy, and control advanced AI systems without relying on foreign nology. (And in fact, DeepSeek’s new V3 model is specifically tuned to do perform well on Chinese-made chips.)While U.S. companies have been hesitant to embrace DeepSeek’s models, they’ve been widely adopted in China and increasingly in other parts of the world

Even some American firms have built applications on DeepSeek’s R1 reasoning model

At the same time, reers warn that the models’ outputs often hew closely to Chinese Communist Party–apved narratives — raising questions their neutrality and trustworthiness

China’s AI push goes beyond DeepSeek: Its industry also includes models including Alibaba’s Qwen, Moonshot AI’s Kimi, and Baidu’s Ernie

DeepSeek’s new release, however, coming just after OpenAI’s GPT-5—a rollout that fell short of industry watchers’ high expectations —underscores Beijing’s determination to keep pace with, or even leapfrog, top U.S. labs

OpenAI is concerned China and DeepSeek DeepSeek’s efforts are certainly keeping U.S. labs on their toes

In a recent dinner with reporters, OpenAI CEO Sam Altman said that rising competition from Chinese open-source models, including DeepSeek, influenced his company’s decision to release its own open-weight models two weeks ago. “It was that if we didn’t do it, the world was gonna be mostly built on Chinese open source models,” Altman said. “That was a factor in our decision, for sure

Beijing quickly pushed back, moving to restrict purchases of Nvidia chips after Commerce Secretary Howard Lutnick told CNBC on July 15: “We don’t sell them our best stuff, not our second-best stuff, not even our third-best.” By optimizing DeepSeek for Chinese-made chips, the company is signaling resilience against U.S. export controls and a drive to reduce reliance on Nvidia

In DeepSeek’s WeChat post, it noted that the new model format is optimised for “soon-to-be-released next-generation domestic chips.” Altman, at that same dinner, warned that the U.S. may be underestimating the complexity and seriousness of China’s gress in AI — and said export controls alone ly aren’t a reliable solution. “I’m worried China,” he said

Less of a leap, but still striking incremental advances nically, what makes the new DeepSeek model notable is how it was built, with a few advances that would be invisible to consumers

But for developers, these innovations make V3.1 cheaper to run and more versatile than many closed and more expensive rival models

But its “mixture-of-experts” design means only a fraction of the model activates when answering any query, keeping computing costs lower for developers

And un earlier DeepSeek models that split tasks that could be answered instantly based on the model’s pre-training from those that required step-by-step reasoning, V3.1 combines both fast answers and reasoning in one system.GPT-5, as well as the most recent models from Anthropic and Google, have a similar ability

But few open weight models have been able to do this so far

V3.1’s hybrid architecture is “the biggest feature by far,” Ben Dickson, a analyst and founder of the Talks blog, told Fortune

Others point out that while this DeepSeek model is less of a leap than the company’s R1 model—which was a reasoning model distilled down from the original V3 that shocked the world in January, the new V3.1 is still striking. “It is pretty impressive that they continue making non-marginal imvements,” said William Falcon, founder and CEO of AI developer platform Lightning AI

But he added that he would expect OpenAI to respond if its own open source model “starts to meaningfully lag,” and pointed out that the DeepSeek model is harder for developers to get into duction, while OpenAI’s version is fairly easy to deploy

For all the nical details, though, DeepSeek’s release highlights the fact that AI is increasingly seen as part of a simmering nological cold war between the US and China

With that in mind, if Chinese companies can build better AI models for what they claim is a fraction of the cost, U.S. competitors have reason to worry staying ahead

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