OpenAI faces competition from cheaper open-source AI models

OpenAI is facing challenges in the competitive landscape of artificial intelligence. According to AI expert Kai-Fu Lee, the company's financial struggles may be exacerbated by the rise of open-source models like DeepSeek AI. Lee highlighted that while many AI models are effective, OpenAI's business model may not be sustainable. Lee noted that OpenAI spends billions annually, while competitors like DeepSeek offer similar technologies at significantly lower costs. He pointed out that a startup like DeepSeek operates with much less money, potentially making it a formidable rival. This situation raises concerns for OpenAI, whose high operational costs might not attract investors. DeepSeek AI, developed by a Chinese hedge fund, claims its AI model can perform like OpenAI's but at a fraction of the price. Lee emphasized that the economics of the AI industry are shifting toward open-source solutions, which are cheaper to produce and operate. This transition suggests a potential decline for the closed-source models that firms like OpenAI and Anthropic rely on. Despite these warnings, Lee did not predict that OpenAI would cease to exist soon. He anticipates that several companies will emerge as leaders in both the US and China, but many others may fail. The AI market remains competitive, with frequent releases of new models expected from various companies, including DeepSeek and Elon Musk's xAI. Lee also mentioned the potential of companies like ByteDance and Baidu, which could become strong contenders in this evolving landscape. Overall, the AI industry is rapidly changing, and companies must adapt to remain viable in the future.