China's DeepSeek releases preview of long-awaited V4 model as AI race intensifies

Chinese artificial intelligence startup DeepSeek on Friday released a preview version of its long-awaited V4 large language model, allowing users to test its new capabilities and features.

The release comes more than a year after the Hangzhou-based company introduced its R1 reasoning model, which rocked global tech markets due to its surprising performance and cost efficiency.

Similar to DeepSeek's previous model releases, the latest upgrade is open-source, allowing developers to download the code, run it locally and modify it in most cases.

The model is available in both a "pro" and a "flash" version, depending on size, with DeepSeek claiming that V4 achieves strong performance against domestic competitors, particularly in agent-based tasks, knowledge processing and inference.

"DeepSeek's V4 preview is a serious flex," offering lower inference costs than previous models, Neil Shah, vice president of research at Counterpoint Research, told CNBC.

Inference costs refer to the computational and financial expenses of running a trained AI model to generate outputs.

DeepSeek also said that V4 has been optimized for use with popular agent tools such as Anthropic's Claude Code and OpenClaw.

According to Counterpoint's principal AI analyst, Wei Sun, V4's benchmark profile suggests it could offer "excellent agent capability at significantly lower cost."

Founded in 2023, DeepSeek gained attention in late 2024 with its free, open-source V3 model, which it said was trained with less powerful chips and at a fraction of the cost of models built by the likes of OpenAI and Google.

Weeks later, in January 2025, it released a reasoning model, R1, that hit similar benchmarks or outperformed many of the world's leading LLMs.

The R1 model had alarmed investors when DeepSeek revealed that it had only taken two months, and not even $6 million, to build the model using lower-capacity Nvidia chips. That called into question the U.S. lead in AI as well as Big Tech's massive spending on AI infrastructure.

Since then, DeepSeek has released a series of model upgrades, but none have matched the impact of R1.

V4's debut is unlikely to have the same market impact as R1, because traders have already priced in the reality that Chinese AI is competitive and cheaper to use, Ivan Su, senior equity analyst at Morningstar, told CNBC.

However, DeepSeek's latest positioning places other Chinese open-source models as direct competitors, Su said.

"This is a framing that didn't exist with R1, and that alone tells you how much domestic competition has intensified," he added.

Since the release of R1, DeepSeek has faced increased competition in China's booming AI sector, with players like Alibaba and ByteDance also releasing new models this year.

Shares of several other Chinese AI players were down in Hong Kong trading on Friday. MiniMax and Knowledge Atlas Technology, also known as Zhipu, each fell around 8%, while Hangzhou-based developer Manycore Tech plunged 9%.

A major question surrounding the release of DeepSeek's V4 model is which chips were used to train and support it.

Chinese tech giant Huawei on Friday confirmed that its latest AI computing cluster, powered by its Ascend AI processors, can support DeepSeek's V4 model.

However, it remains unclear how extensively Huawei's chips were used in training, compared with those from Nvidia.

Chinese developers have been restricted from directly purchasing Nvidia's most advanced AI chips due to U.S. export controls.

Meanwhile, Beijing has stepped up efforts to develop its domestic chip industry and reportedly pushed Chinese tech companies to adopt domestic alternatives from chipmakers such as those from Huawei.

Counterpoint's Wei Sun said that V4's ability to run natively on local chips could have massive implications, helping Beijing achieve more AI sovereignty and further reduce reliance on Nvidia.

"This will ultimately speed up the global AI developments as well," she added.

After DeepSeek announced its V4 release, shares of Chinese contract chip manufacturers rose in Hong Kong, with SMIC and Hua Hong Semiconductor surging 8.9% and 15.2%, respectively.