DeepSeek made waves in the AI industry last week with its “five consecutive bombshells” during open-source week, culminating in a shocking revelation: a theoretical profit margin of 545%, with their V3/R1 inference system potentially generating daily profits of 3.46 million yuan (approximately $480,000).

This extraordinary profitability claim has sparked intense debate about what it means for the computing industry, AI model providers, and the broader technology ecosystem.

Understanding the 545% Profit Margin

It’s important to clarify that DeepSeek’s announced 545% profit margin is a theoretical calculation based on specific conditions. According to tech analysts, the actual profit margin for DeepSeek’s R1 model is approximately 85%, while the V3 model’s pricing brings the margin down to around 70%. Even with these adjusted figures, the profitability remains impressive compared to industry standards.

For context, Anthropic’s projected 2024 profit margin is 61% according to TD Cowen’s analysis. Using DeepSeek’s calculation methodology and factoring in AWS cloud computing margins (estimated between 25-40%), Anthropic’s profit margin could reach 74-85%.

Is This a Breakthrough for Computing Efficiency?

DeepSeek’s case demonstrates that through extreme infrastructure optimization, companies can achieve remarkably high computing utilization rates and performance, even with relatively limited hardware resources (using NVIDIA H800 GPUs).

However, experts remain divided on whether DeepSeek’s innovations will reduce demand for computing power:

• The optimistic view: Renowned investor Duan Yongping agrees with NVIDIA CEO Jensen Huang that DeepSeek’s efficiency won’t reduce computing demand but will instead inspire the pursuit of more efficient AI models, driving continued growth in computing requirements.
• The skeptical view: Some international tech commentators suggest DeepSeek has “knocked out” NVIDIA, arguing that with DeepSeek’s ultra-high computing utilization rates, current global AI demand could be satisfied with far fewer resources than previously thought. According to one critic, DeepSeek processes 600 billion tokens daily using just 2,400 H800 GPUs – scaling this up 100x would process 60 trillion tokens daily, potentially exceeding global demand.

Implications for the Cloud Industry

DeepSeek’s success makes the similarities between AI cloud computing and traditional cloud computing more apparent. Both face challenges in balancing idle capacity during off-peak periods with maintaining stability during peak usage.

The scale effect in cloud computing becomes even more significant with DeepSeek’s approach. Cloud providers with their own business workloads (like Alibaba, Tencent, and Apple) may have cost advantages over pure cloud providers because they can use inference clusters as the foundation for all their operations, achieving greater economies of scale.

Additionally, private cloud deployments may become less attractive. Ultra-sparse MoE models might not be suitable for individuals or companies with limited infrastructure expertise, as small-scale GPU deployments could cost significantly more than those operated by major providers.

Impact on AI Model Providers

DeepSeek’s open-sourcing and technical disclosures set a new benchmark for the entire industry. Competitors now face greater pressure to reduce prices while maintaining competitiveness. The case demonstrates that inference costs can be significantly lower than previously expected, potentially triggering a new price war.

OpenAI’s subscription model of $20/month may face challenges in this new environment of dramatically improved cost efficiency.

Ecosystem Effects

DeepSeek’s strategy focuses on foundation models and cutting-edge innovation, using open-source technology to attract developers to build B2B and B2C applications on its platform, creating a complete industry value chain.

The profit margins for ecosystem partners could increase substantially. Cloud platforms and businesses throughout the supply chain could theoretically achieve high returns by deploying DeepSeek’s services.

In conclusion, DeepSeek’s remarkable profit margin isn’t just a numerical wonder but a profound revelation for the AI industry. It demonstrates the immense potential of infrastructure optimization, driving transformations in computing resources, cloud services, AI models, and ecosystems. This foreshadows a more efficient, cost-effective, and competitive AI era on the horizon.