China’s DeepSeek releases upgraded R1 AI model in OpenAI competition

Chinese startup DeepSeek, which caused shockwaves across markets this year, quietly released an upgraded version of its artificial intelligence reasoning model.

The company did not make an official announcement, but the upgrade of DeepSeek R1 was released on AI model repository Hugging Face.

DeepSeek rose to prominence this year after its free, open-source R1 reasoning model outperformed offerings from rivals including Meta and OpenAI. The low-cost and short time of development shocked global markets, sparking concerns that U.S. tech giants were overspending on infrastructure and wiping billions of dollars of value of major U.S. tech stocks like AI stalwart Nvidia. These companies have since broadly recovered.

Just as was the case with DeepSeek R1’s debut, the upgraded model was also released with little fanfare. It is a reasoning model, which means the AI can execute more complicated tasks through a step-by-step logical thought process.

The upgraded DeepSeek R1 model is just behind OpenAI’s o4-mini and o3 reasoning models on LiveCodeBench, a site that benchmarks models against different metrics.

“DeepSeek’s latest upgrade is sharper on reasoning, stronger on math and code, and closing in on top-tier models like Gemini and O3,” Adina Yakefu, AI researcher at Hugging Face, told CNBC.

The upgraded model has “major improvements in inference and hallucination reduction,” Yakefu said, adding that “this version shows DeepSeek is not just catching up, it’s competing.” Hallucination refers to AI that provides incorrect information.

DeepSeek has become the poster child of how Chinese artificial intelligence is still developing despite U.S. attempts to restrict the country’s access to chips and other technology. This month, Chinese technology giants Baidu and Tencent revealed how they were making their AI models more efficient to deal with U.S. semiconductor export curbs.

Jensen Huang, CEO of Nvidia, which designs the graphics processing units required to train huge AI models, slammed U.S. export controls on Wednesday.

“The U.S. has based its policy on the assumption that China cannot make AI chips,” Huang said. “That assumption was always questionable, and now it’s clearly wrong.”

“The question is not whether China will have AI,” Huang added. “It already does.”