Why DeepSeek can offer its AI services much cheaper than OpenAI

By Joel Wong

Here’s a simple, layman-friendly explanation of why DeepSeek can offer its AI services much cheaper than OpenAI:

1. Different Design Makes It Less Expensive to Run

DeepSeek uses a clever engineering trick called Mixture-of-Experts (MoE) and other efficiency boosters. Instead of firing up the whole giant model every time, it only uses the parts it really needs for each task. It’s like using a small engine for easy jobs instead of firing up a V12 every time — saving energy and cost every time it answers a question.

2. Cheaper Training and Hardware

Training a cutting-edge AI usually costs tens to hundreds of millions of dollars with expensive GPUs. DeepSeek claims it trained its earlier models for just a few million dollars by using less powerful (and cheaper) hardware and highly optimized code.

That means:

They didn’t spend as much building the model in the first place.

They don’t need super-expensive computers to run it.

3. Open-Source = Lower Overhead

DeepSeek publishes its model weights and code openly under a permissive license. That means anyone can host, modify, or reuse it without paying a big licensing fee. OpenAI’s models are proprietary — you pay for every request through their API.

Open-source also:

Cuts out middlemen (cloud providers, restrictive contracts).

Lets hobbyists or businesses self-host if they want even lower costs.

4. Very Low Pricing Per Use

Because DeepSeek is cheaper to build and run, they can charge a lot less per “token” (a chunk of text). For example, some entry prices for DeepSeek are 90%+ cheaper per million tokens than comparable OpenAI models.

So if you’re a developer and need to generate a lot of text or handle many questions, DeepSeek can literally cost a fraction of the price.

5. Fewer Costs for Safety/Compliance

OpenAI spends a lot on safety systems, moderation tools, and compliance with Western privacy rules. DeepSeek operates primarily under different regulatory standards, which reduces legal and operational overhead (for now).

Summary (Plain Comparison)

Factor DeepSeek OpenAI

Training cost Low (millions) Very high (tens–hundreds of millions)

Running cost per query Very low Higher

Licensing Open-source Proprietary

Safety/Compliance costs Lower Higher

Hardware requirements Can use cheaper GPUs Often uses top-tier/cloud GPUs

In Plain English

Think of DeepSeek like a fuel-efficient car: designed to get you almost the same distance (good answers) while using far less gas (computing and money).

OpenAI is more like a luxury sports car: more expensive parts, more features, and higher performance in general — but also a much higher price tag.

Both have their place — but if your priority is “cheap and capable,” DeepSeek’s design and pricing choices let them undercut OpenAI’s costs significantly.