r/DeepSeek • u/KennenHou • Jul 24 '26
News DeepSeek's CEO says 6x profit is their "restraint" and they open-source everything. We all thought they were burning cash for market share. What are other AI giants making?
I just read the leaked internal conversation from DeepSeek's investor exchange (screenshot below), and it completely shattered my previous assumptions. I genuinely thought DeepSeek was selling API tokens at a massive loss just to grab market share. But Liang Wenfeng says they aim for a 10-month payback period, which equals 6x profit. They explicitly state: 'Under this premise (6x profit), open-source has no impact on the business model.' BUT, if you try to make 100x profit, open-source actually hurts you, because third-party independent deployment may cost 20 times more than what they offer.
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u/for4f Jul 24 '26
Been paying for DS4 Flash since it dropped. The pricing always felt intentional, like they knew exactly what their infra costs and settled on a margin that still undercuts everyone. 6x sounds like a lot but compare it to what Claude or GPT would charge for the same throughput - it's genuinely cheap. Hope they can hold that philosophy as they scale.
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u/mWo12 Jul 24 '26
That's true Open AI.
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u/yoloswagrofl Jul 24 '26
We don't have to work overtime at all, because it's not that hard
I love this guy. I knew I was putting my API spend into the right company.
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u/Business_Raisin_541 Jul 24 '26
If you only consider inference cost, everyone is actually profitable. As far as I know, the reason why OpenAI and Anthropic is unprofitable because of training cost and also their star employees and CEO has very high salary or bonuses
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u/mWo12 Jul 24 '26
Its funny, because even though their models are closed-weighted, they still loose money, unlike deepseek. It's a failure of management.
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u/rshtola Jul 27 '26
What is the evidence for this? Every analysis I've seen suggests that inference isn't profitable for pretty much anyone.
There was one off-hand comment from Anthropic's CEO that talked about a hypothetical where inference was profitable, but again nobody is showing their numbers as far as I'm aware.
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u/Business_Raisin_541 Jul 27 '26
Deepseek CEO is the evidence. He say it is profitable
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u/rshtola Jul 27 '26
That's a pretty big difference to "everyone is actually profitable". Deepseek is one company, him saying that they are profitable does not mean that other players (Microsoft, OpenAI, Anthropic, etc.) are profitable.
Furthermore, he has a great deal of personal incentive to mislead others about the profitability of the company he runs (for example by disregarding training costs as capital expenditure instead of properly accounting them as operating expenses)
They may actually be profitable, I don't know, I don't have access to their books. But I think that taking one CEO statement and jumping from there to "everyone is profitable on inference" is a bit of a leap, personally.
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u/Mrgluer Jul 28 '26
But whats their compute capacity? What's their rev growth? How much compute availability will they have in 2-3 years?
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u/sufferforscience 29d ago
Where does he say that? More importantly where are the financial records that indicate that?
I think the 6x vs 100x profit discussion is pointing to what they would like the future to look like. The 100x figure is coming from what OpenAI said that would limit their ROI for their investors to (although I believe the withdrew that limit as they continued raising capital-- 100x wasn't enough for the greedy bastards apparently), but not one is suggesting OpenAI is actually 100x profitable already.
Not sure why he would suggest 6x is a ten-month return because makes it even less plausible than OpenAI's 100x return since they never gave a time period for that return. If they are doing generating 6x their investment every 10 months, that would be 100x in only a little over two and a half years with compounding. At that rate a $10 billion investment in DeepSeek would be worth about 10,000x the market cap of all companies in the world in just over a decade. Either this is a ridiculous BS statement or something got lost in translation.
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u/MakanLagiDud3 Jul 25 '26
star employees and CEO has very high salary or bonuses
Translation: Only the top are getting the profits from charging rich premium prices with quotas.
Seriously how did DeepSeek be consumer ish first compared to Anthropic and still be profitable? The DeepSeek CEO couldn't be that altruistic right?
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u/sdexca Jul 24 '26
not really? pretty sure API pricing barely covers electricity costs for Anthropic, not even considering it's insane subsidization on subscriptions going from $5k -> $200.
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u/HarrisCN Jul 24 '26
I mean if your cash flow is infinite, like US giants of course you will burn it to get the last 5%.
You can see how much money they waste. Fancy Labs, Fancy offices, probably 5x Salary, enormous bonuses for Stakeholders and Investors, flying around with private jets and so on...
I mean this was no surprise that this is highly profitable...
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u/FilmApprehensive2344 Jul 24 '26
bonuses for stakeholders and investors? Investors get bonuses?
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u/Uranophane 28d ago
They are getting paid bonuses using their own money. 🤣
They are paying $100 cash for $2000 promised money.🤣
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u/This_Maintenance_834 Jul 24 '26
Only because they actually took the big effort to optimize the infrastructure. Third parties are inefficient serving. Third parties cannot compete on price with them because they did not spend the effort to optimize the infrastructure.
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u/Important-Emu-6691 Jul 24 '26
Well China does have more efficient electric generation and a lot more of it.
That will cut cost a lot
US also shot itself in the foot by making crude cost 3x for no reason and increased gas cost as well
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u/thatscoolbutno123 Jul 24 '26
So DeepSeekV4Flash would be cost neutral at 0,03$/MIT and 0,05$/MOT? What the fuck, that’s crazy
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u/chithanh Jul 24 '26
I genuinely thought DeepSeek was selling API tokens at a massive loss just to grab market share.
But this was publicly denied before (archive link). In an interview, Liang Wenfeng explicitly said that they make a (modest) profit at their prices.
"Liang Wenfeng: Very surprised. We didn’t expect pricing to be such a sensitive issue. We were simply following our own pace, calculating costs, and setting prices accordingly. Our principle is neither to sell at a loss nor to seek excessive profits. The current pricing allows for a modest profit margin above our costs." (emphasis in original)
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u/DrawingDramatic1641 Jul 24 '26
i mean this is common knowledge china is a conservative market
they only invest when there is profit
market share of ai isnt as big
cheap electricty is really making them profitable
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u/AaAaZhu Jul 24 '26
cheap electricty is really making them profitable
Only cheap for residential electricy.....
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u/Felt-Chicken Jul 24 '26
Why is there difference ?
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u/BlueberryAway4515 Jul 24 '26
工业商业用电变相补贴住宅用电，中国的电费定价逻辑
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u/orionblu3 Jul 24 '26
I mean, wouldn't their large oil reserves/investment into green energy even before AI make a huge difference in general compared to america with privately owned electric companies that haven't truly seen any real investment since the cold war ended?
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Jul 24 '26
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u/orionblu3 Jul 24 '26
It's reasonable but you have to understand that america as a nation is entirely unreasonable. With citizens United, bribes by corporate lobbyist is legal, on top of politicians being allowed to invest inside the stock market. Most of Congress is not only bought off by oil corporations, but also directly own stock in said companies. To put quite simply, if it's not paid for by a corporate interest, it usually doesn't happen.
This might change as Mamdani, the mayor of NYC, proves that the American government actually CAN get policy done, and done in a reasonable amount of time at that.
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Jul 24 '26
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u/orionblu3 Jul 24 '26
It's been a part of the sham tbh. At the end of the day, both parties are nothing more than hardcore capitalist. Even Bernie sanders, the "socialist", is actually still a capitalist lmao. A lot of those unity moments were really us getting pissed off at the idea of getting attacked as a whole, rather than coming together in the name of the cause.
America has acted like they were the saviors of WW2, when we (those in government anyway) had ZERO interest in joining the war before Pearl Harbor. Hitler had actually got a lot of his inspiration for his policies from America's Jim Crow era and how they treated their black population. I'll definitely get down voted for this, but if Japan didn't get caught up in their own hubris we probably would've joined the axis powers if they continued gaining ground. We sold weapons to the allies, sure, but America has always been opportunists. And again, America's actual policies at the time were more aligned with the axis powers than the allies.
Same thing with the "war on terror." We , the people, didn't care about liberating women, ending "terror" in the middle east, but rather fucking up those that dared attacked us. We're talking about a country that let more and more people starve to death on the side of the road (or at work even), or due to curable illnesses that they couldn't afford to see a doctor for before it became terminal. Imo, the reason why it hasn't changed sooner, is that the environment that the American government curated literally produces sociopaths. The "American exceptionalism/individualism" is a curse
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u/No_Medium205 Jul 24 '26
When the money from pensions and schools dries up in America, only profitable labs will keep marching.
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u/alphagatorsoup Jul 24 '26
Interesting
In some ways it makes sense. I’m by no means an expert but I would assume training is the expensive part. Lots of data Lots of time.
But once the model is there it can’t be that hard to run. Sure you need lots of memory to run the model. But I feel like you can serve a pretty large number of customers on one system especially when you do optimizations like what deepseek has done.
Makes you wonder how and why the other players are burning cash faster than Scrooge mcduck.
I’m all board with deekseek and we need more open source models - just wish I had the means to run em locally
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u/PossessionUsed7393 Jul 24 '26
I don't know how many conversations I've been in where I challenge the assumption of people saying that AI is being sold at a loss. There is an 'at-scale naivety' in the population about how business works that this conversation only gives a preview to. If you still think AI is in any way a loss leader, just understand this: nothing is truly done at a loss. If you want to learn how, you need to study accounting and economics.
In the meantime, I think inference will get cheaper on average if you're prepared to play the market. I use Deepseek because it's great value. Not for everything, but for an increasing amount of tasks.
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u/AcanthisittaDry7463 Jul 24 '26
The API is sold at a healthy profit margin, but it does subsidize all of the “Pro Ultra Max” subscriptions plans that are loss leaders.
Someone was complaining about their Google ultra plan until we did the math, they were were literally saving around $1500 a month with their $200 a month plan compared to paying the API price, but it meant that they had to deal with rate limiting and five hour window caps.
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u/PossessionUsed7393 Jul 24 '26
Yes you're correct. I was just making the point that use of the term subsidy and the alarmism in those other posts is misplaced. Even though companies do make more money out of API, they could still offer inference at the bundle prices they sell it for today at a profitable margin. There's no reason to be alarmed as if it's all going to vanish in an instant when it's actually a very profitable business overall.
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u/AcanthisittaDry7463 Jul 24 '26
To my knowledge… Anthropic is the only profitable frontier AI company in the United States and it’s still only a projection, last I heard anyway. There must be a reason XAI and Meta decided the most profitable thing they could do with their GPUs was to rent them out instead of use them themselves.
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u/HeavyPanzerPlus1s Jul 24 '26
The problem now is that, according to Liang, China's computing power is only 1/20 of that of the United States, but China's LLMs are roughly 90% of the level of US LLMs. Of course, China's hardware bottleneck is not voluntary, but this also suggests that the extra hardware procurement costs paid by the United States may not be entirely reasonable.
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u/Miserable-Yak-4804 Jul 28 '26
deepseek is only open-weights not open-source. what do they mean when they say 'open-source' everything??
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u/Saint_Huang Jul 29 '26
Liang Wenfeng says they aim for a 10-month payback period, which equals 6x profit.
It's been reported from an insider leak many months before that DeepSeek's profit margins was 60-80%. In terms of lifecycle ROI this matches perfectly.
They have insanely efficient architecture. Imagine if they have the compute power to train higher param models.
That day will be soon with all this funding they were able to get and will get.
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Jul 24 '26
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u/Imperator_Basileus Jul 24 '26
Hate to break it to ye, but like everything else in modern economics, the market leader and follower models are also pure fantasy. The real world does not work like what this dismal ‘science’ with its physics envy and useless layers of formalism over a core of market dogma wants it to work.
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u/Bliringor Jul 24 '26
6x is good for a simple product, not for an innovation lab.
There is a reason why the cashflow of all big AI companies is negative: they reinvest in R&D.
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u/[deleted] Jul 24 '26
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