Chinese AI startup DeepSeek has made a bold claim, stating that its online services can achieve a staggering 545% "cost profit margin". However, this impressive figure comes with significant asterisks, as the company admits that its actual revenue is "substantially lower" due to various factors.

In a recent GitHub post, DeepSeek outlined its approach to achieving higher throughput and lower latency, and shared some eye-catching numbers. According to the company, if its V3 and R1 models were billed at R1 pricing for a 24-hour period, it would generate $562,027 in daily revenue. Meanwhile, the cost of leasing the necessary GPUs (graphics processing units) would be just $87,072, resulting in the impressive profit margin.

However, DeepSeek acknowledges that its actual revenue is significantly lower due to several factors. These include nighttime discounts, lower pricing for V3, and the fact that only a subset of services are monetized, with web and app access remaining free. If the app and website weren't free, and other discounts weren't available, usage would likely be much lower, making these calculations highly speculative.

Despite the caveats, DeepSeek's claims are noteworthy, especially amidst ongoing debates about AI's cost and potential profitability. The company gained attention in January with its new model, which reportedly matched OpenAI's o1 on certain benchmarks despite being developed at a lower cost and in the face of U.S. trade restrictions that prevent Chinese companies from accessing the most powerful chips.

The implications of DeepSeek's tech extend beyond the AI community. Its app briefly displaced OpenAI's ChatGPT at the top of Apple's App Store, although it has since fallen to #6 in productivity, behind ChatGPT, Grok, and Google Gemini. The company's claims have also sparked concerns about AI spending, with tech stocks tumbling and analysts raising questions about the viability of AI investments.

While DeepSeek's profit margin claims may be speculative, they do highlight the potential for AI models to generate significant revenue. As the AI landscape continues to evolve, it will be interesting to see how companies like DeepSeek balance the costs of development with the potential for profit. One thing is certain – the AI industry will be closely watching DeepSeek's next moves.

In the broader context, DeepSeek's claims underscore the ongoing competition between AI startups and established players. As AI technology advances, companies will need to adapt and innovate to stay ahead of the curve. With its impressive profit margin claims, DeepSeek has thrown down the gauntlet, and it will be fascinating to see how the industry responds.