Last week, DeepSeek, a Chinese artificial-intelligence startup, demonstrated a new AI model that offers comparable performance to Big Tech’s best chatbots at seemingly a fraction of their development cost. With Silicon Valley on its heels and a startup suggesting AI prowess may not be reserved for deep-pocketed giants, New York is in an opportune position to capitalize on DeepSeek’s contributions and cement itself as a leader in the AI race.
The city is the second largest hub for artificial intelligence, but the types of companies based here are different from the ones out west. California is home to the tech giants that monopolized the early stages of AI development, like OpenAi, Google and Meta. New York’s firms tend to be more nimble and specialize in applied AI. There are 2,000 AI-startups here, including 35 AI unicorns.
So when DeepSeek stunned the tech industry last week — it launched an open-source AI model called R1 that it claims rivals the capabilities of western technology — New York’s tech sector took notice. The upstart’s success offered a counterpoint to the belief that the future of AI will require ever-increasing amounts of computing power, energy and capital.
If DeepSeek’s promise proves true, the ability to create models at a cheaper price point will likely benefit smaller AI players that previously may have been priced out of the technology.
“I think it levels the playing field between earlier stage companies and more established, better resourced companies,” said Michael Simon, chief strategy officer at Zencity, a Dumbo-based govtech firm. His company does not use DeepSeek services, but he is hopeful that the cheaper technology will lower, or at least keep steady, costs of AI service across the board.
“This means more people and more companies will try to build more AI tools at all ends of the spectrum,” added Julie Samuels, founder and president of Tech:NYC, a non-profit that acts as a booster for local tech firms. “It lowers the barrier of entry, which is a good thing.”
Why does expanded access stand to benefit New York? Because many of the country’s smaller and mid-sized firms are based or operate in the city. “It’s good for New York in that it’s good for basically any place that’s not Silicon Valley because you no longer have to be one of the giant incumbents to be able to do this,” Simon said. “It spreads the opportunity more evenly throughout the country.”
New York’s AI companies take in nearly a third of the city’s venture capital funding, but their pockets are nowhere near deep enough to compete with the Bay Area behemoths given the current cost of AI development.
Much of that cost is associated with chips. To train large language models, AI companies rely on graphics processing units — GPUs — that can process vast amounts of data at high speeds. Not only are these chips in short supply, they’re also exceedingly expensive, with the most cutting-edge features made primarily by a single company: Nvidia.
But DeepSeek’s initial success suggests much more can be done with fewer chips.
“Startups now have the opportunity to do more with less,” said serial entrepreneur and investor Michael Lazerow. The co-founder of Buddy Media and Velvet Sea Ventures cautioned not to put too much stake on a single development but emphasized the magnitude of what DeepSeek signals. “It democratizes the training of whatever you’re trying to do, and it’s just the beginning.”
He compared it to the democratization of the internet two-plus decades ago. It used to cost companies millions of dollars to build webpages; now one can launch a site from a smartphone.
“Everything in tech gets better, faster and cheaper over time,” he said, adding that AI could get to the point where training a model might be the kind of thing a few kids in a college dorm room can do. “Now if you just put your head down, you’ve never had more opportunity.”
Just as DeepSeek upended our understanding of the costs of AI, industry and city leaders in New York were formulating a plan to make the city the “premier applied AI capital of the world.” This morning, representatives from the New York City Economic Development Corporation, Tech:NYC, OpenAI and the mayor’s office published an 18-point plan to jolt the city’s AI economy into the future and onto the global stage. Part of that roadmap calls for a partnership between the NYCEDC and OpenAI to expand access to the technology to New York residents and businesses, including providing free access to 500 free ChatGPT Plus accounts.
“This is a New York story,” Samuels said of more firms having access to AI tools, “because here in New York, we will inevitably find the uses of AI that make the most commercial sense.”
The city’s AI companies will undoubtedly keep close eyes on the upstart’s fate in the coming weeks and months. Some industry experts have cast doubt on whether the company is being forthcoming about the full costs of its development. Plus, its cloud infrastructure is going to be tested by its sudden popularity. The company briefly experienced a major outage on Jan. 27 and will have to manage even more traffic as new and returning users pour more queries into its chatbot. If it can weather those issues, though, New York’s companies will rejoice.
Bloomberg contributed reporting.
