Hello, tech enthusiasts! Today, we dive into an intriguing claim made by a Chinese AI startup known as DeepSeek.

The company recently made waves by asserting that its AI models could potentially generate astonishing profit margins of 545%. Sounds impressive, right? But hold your applause—this figure comes with some important caveats.

According to a post shared on X, DeepSeek boasts that its online services achieve a “cost profit margin” of 545%. However, this margin relies heavily on what they term as “theoretical income.”

The details reveal that DeepSeek calculated these massive margins based on projected revenues if all their services had been billed under their optimal pricing strategy using their R1 model. They mentioned that in a 24-hour period, if utilized fully at that pricing, revenue could hit a staggering $562,027. But wait—there’s more!

The actual cost incurred for leasing the required GPUs rests at around $87,072. You might think, ‘Hey, that’s great!’ But the reality is that their existing revenue is much lower, influenced by various factors like discounts and a significant number of services remaining free.

DeepSeek candidly admitted that their real earnings fall well short of these grand projections. They pointed out that many factors, including lower pricing for their V3 model and the absence of monetization for several of their free services, have a major impact on actual revenue generation.

So, while these numbers provide a glimpse into potential profits, they should be taken with a grain of skepticism. This type of speculation shines a light on the broader debates surrounding not just DeepSeek, but the entire AI industry’s cost and profitability landscape.

Since bursting onto the scene, DeepSeek has positioned itself as a serious competitor. It recently developed a model purportedly matching OpenAI’s performance on key benchmarks, all while cutting costs significantly in the face of stringent trade restrictions on advanced chips for Chinese firms.

Even their app has temporarily outperformed ChatGPT on the Apple App Store rankings, which is no small feat! However, currently, it sits at #6 behind other major players.