DeepSeek reveals theoretical 545 profit margins on its AI models

BEIJING – Chinese artificial intelligence phenomenon DeepSeek revealed some financial numbers on March 1, saying its “theoretical” profit margin could be more than five times costs, peeling back a layer of the secrecy that shrouds business models in the AI industry.

The 20-month-old start-up that rattled Silicon Valley with its innovative and inexpensive approach to building AI models, said on X its V3 and R1 models’ cost of inferencing to sales during a 24-hour-period on the last day of February put profit margins at 545 per cent.

Inferencing refers to the computing power, electricity, data storage and other resources needed to make AI models work in real time.

However, DeepSeek added a disclaimer in details it provided on GitHub, saying its actual revenues are substantially lower for various reasons, including the fact that only a small set of its services are monetised and it offers discounts during off-peak hours.

Nor do the costs factor in all the research and development, and training expenses for building its models.

While the eye-popping profit margins are, therefore, hypothetical, the reveal comes at a time when profitability of AI start-ups and their models is a hot topic among technology investors.

Companies from OpenAI to Anthropic PBC are experimenting with various revenue models, from subscription-based to charging for usage to collecting licensing fees, as they race to build ever more sophisticated AI products.

But investors are questioning these business models and their return on investment, opening a debate on the feasibility of reaching profitability any day soon.

The Hangzhou-based start-up said on March 1 on X that its online service has a “cost profit margin of 545 per cent” and gave an overview of its operations, including how it optimised computing power by balancing load – that is, managing traffic so that work is