Open-source models and fresh funding: China’s AI start-ups scramble to respond to DeepSeek

DeepSeek’s disruption, however, appears to have given China “the edge” in terms of strong AI model capabilities and democratising access to the technology for more companies to pursue further innovation.

“Before DeepSeek’s R1, many [Chinese AI start-ups] were starting to pivot and focus on consumer-facing applications, driven by the same monetisation strategy in the mobile internet era,” said AI analyst Grace Shao, founder of industry newsletter AI Proem. “Meanwhile, in the US, AI has been largely diffused as a way to empower enterprises and white-collar productivity.”

Shao pointed out that the divergent approaches are caused by structural economic differences between the US and China markets. She added that strong model capabilities remain the foundation of the AI industry.