Chinese tech company Alibaba on Wednesday released a new version of its Qwen 2.5 artificial intelligence model that it claimed surpassed the highly-acclaimed DeepSeek-V3.

The unusual timing of the Qwen 2.5-Max’s release, on the first day of the Lunar New Year when most Chinese people are off work and with their families, points to the pressure Chinese AI startup DeepSeek’s meteoric rise in the past three weeks has placed on not just overseas rivals, but also its domestic competition.

“Qwen 2.5-Max outperforms ... almost across the board GPT-4o, DeepSeek-V3 and Llama-3.1-405B,” Alibaba’s cloud unit said in an announcement posted on its official WeChat account, referring to OpenAI and Meta’s most advanced open-source AI models.

The Jan. 10 release of DeepSeek’s AI assistant, powered by the DeepSeek-V3 model, as well as the Jan. 20 release of its R1 model, has shocked Silicon Valley and caused tech shares to plunge, with the Chinese startup’s purportedly low development and usage costs prompting investors to question huge spending plans by leading AI firms in the United States.

But DeepSeek’s success has also led to a scramble among its domestic competitors to upgrade their own AI models.

Two days after the release of DeepSeek-R1, TikTok owner ByteDance released an update to its flagship AI model, which it claimed outperformed Microsoft-backed OpenAI’s o1 in AIME, a benchmark test that measures how well AI models understand and respond to complex instructions.

This echoed DeepSeek’s claim that its R1 model rivalled OpenAI’s o1 on several performance benchmarks.

DEEPSEEK VERSUS DOMESTIC COMPETITORS

The predecessor of DeepSeek’s V3 model, DeepSeek-V2, triggered an AI model price war in China after it was released last May.

The fact that DeepSeek-V2 was open-source and unprecedentedly cheap, only 1 yuan ($0.14) per 1 million tokens - or units of data processed by the AI model - led to Alibaba’s cloud unit announcing price cuts of up to 97% on a range of models.

Other Chinese tech companies followed suit, including Baidu, which released China’s first equivalent to ChatGPT in March 2023, and the country’s most valuable internet company Tencent.

Liang Wenfeng, DeepSeek’s enigmatic founder, said in a rare interview with Chinese media outlet Waves in July that the startup “did not care” about price wars and that achieving AGI (artificial general intelligence) was its main goal.

OpenAI defines AGI as autonomous systems that surpass humans in most economically valuable tasks.

While large Chinese tech companies like Alibaba have hundreds of thousands of employees, DeepSeek operates like a research lab, staffed mainly by young graduates and doctorate students from top Chinese universities.

Liang said in his July interview that he believed China’s largest tech companies might not be well suited to the future of the AI industry, contrasting their high costs and top-down structures with DeepSeek’s lean operation and loose management style.

“Large foundational models require continued innovation, tech giants’ capabilities have their limits,” he said.