By Robert Hulse, Stuart Meyer, Tyler Newby and Frederick Tsang
A flurry of developments in late January 2025 has caused quite a buzz in the AI world. On January 20, DeepSeek released a new open-source AI model called R1 and an accompanying research paper. R1 was touted as performing comparably to proprietary frontier models at a fraction of the cost, with drastically reduced computational resources needed both to train and run the model. DeepSeek explained that it used new techniques in reinforcement learning, but others suspect that it might also have benefitted from unauthorized model distillation. Within a week, there was a strong market reaction, with AI-related semiconductor stocks dropping more than 10% on January 27.