AuthorsBertin Martens
Introduction: enter DeepSeek
The start of 2025 was marked by several major announcements related to artificial intelligence. The release of the DeepSeek (2025) AI model on 22 January blew a trillion-dollar hole in the stock market 1 , on the basis that China’s DeepSeek would substantially undercut American AI giants. DeepSeek was soon followed by many copy-cat small and cheap AI models. Markets concluded somewhat prematurely that DeepSeek broke the AI model scaling law and would undermine the rationale for heavy investment in AI computing infrastructure.
But can small AI models really perform as well as big models, without access to huge quantities of the expensive Nvidia AI processor chips that dominate the sector? Big-tech AI firms were not impressed by this market turbulence and doubled down on their AI infrastructure spending 2 . Just a week before the DeepSeek release, OpenAI and Oracle announced a $100 billion to $500 billion AI infrastructure investment – dubbed Stargate – to catch up with big-tech firms 3 . Two weeks later, the European Union announced its own €200 billion AI investment initiative 4 .
This Policy Brief aims to go beyond the DeepSeek hype. It analyses innovations in AI models over the past half year and examines the economic implications for AI companies and policymakers, in particular in the EU. It argues that DeepSeek is innovative, but in line with model evolution over the past half year – not an unexpected revolution. It still fits into the ‘transformer’ generative AI or large language model (LLM) paradigm of the last eight years (Vaswani et al, 2017).
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