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Two years ago, when big-name Chinese technology companies like Baidu and Alibaba were chasing Silicon Valley’s advances in artificial intelligence with splashy announcements and new chatbots, DeepSeek took a different approach. It zeroed in on research.

The strategy paid off.

The Chinese start-up has jolted the tech world with its claim that it created a powerful A.I. model that was significantly cheaper to build than the offerings of its better-funded American rivals.

In the rivalry between China and the United States over domination of artificial intelligence, DeepSeek seemed to come out of nowhere. In fact, it has skyrocketed through China’s tech world in recent years with a path that was anything but conventional.

Its mission to pursue research mirrors that of companies like OpenAI, the Silicon Valley firm that marked an American signature over A.I. in the fall of 2022. But the similarities mostly end there.

DeepSeek’s origins are in finance, not technology for technology’s sake. Its parent company, a Chinese hedge fund called High-Flyer, began not as a laboratory devoted to safeguarding humanity from A.I. like Open AI, but as a business using A.I. to make bets in the Chinese stock market.

High-Flyer had thrived by capitalizing on a market dominated by China’s retail investors, who are known for jumping in and out of stocks impulsively. In 2021, High-Flyer found itself pressured by regulatory crackdowns in China on speculative trading, which the authorities in Beijing felt was at odds with their attempts to keep markets calm.

So High-Flyer pursued a new opportunity that it said aligned better with Chinese government priorities: advanced A.I.

“We want to do things with greater value and things that go beyond the investment industry, but it has been misinterpreted as A.I. stock speculation,” High-Flyer’s chief executive, Lu Zhengzhe, told Chinese state media in 2023. “We have set up a new team independent of investment, which is equivalent to a second start-up.”

DeepSeek was born. As with many other Chinese start-ups, DeepSeek came at an established market with a different business approach.

DeepSeek’s latest model for artificial intelligence is believed to be nearly as powerful as American rivals but far more efficient. Its success suggests that Silicon Valley’s A.I. lead has shrunk. DeepSeek’s breakthrough, despite efforts by Washington to limit Chinese access to the advanced chips needed for A.I., raises questions about how effective those controls can be long term — although DeepSeek’s founder has acknowledged that the chip restrictions are a limitation.

DeepSeek did not rely on making consumer-facing A.I. products for revenue, and only this month released its first chatbot, which allows anyone to generate text and photos with simple commands. Instead, the company used the money that High-Flyer made from stock trading to bankroll ambitious research. The approach set it apart from U.S. rivals, all of which are ultimately consumer technology companies.

This unconventional approach also allowed DeepSeek to sidestep stringent regulations the Chinese government has placed on A.I. use by the public. Because its focus was research and selling to businesses who use its model — and, until the release of its chatbot this month, not consumer applications — its early work did not trigger the same government restrictions.

DeepSeek is run by its chief executive, Liang Wenfeng, a thin, bespectacled engineer who studied at Zhejiang University in the eastern city of Hangzhou. He has said repeatedly in the few interviews he has given to Chinese media that to catch up with American innovation, Chinese companies must put research before profits. DeepSeek and High-Flyer did not respond to requests for comment.

What Chinese technology companies “lack in innovation is certainly not capital, but a lack of confidence and knowledge about how to organize a high density of talent to achieve effective innovation,” he said in a widely circulated interview with Chinese tech outlet 36Kr.

Those who have worked with Mr. Liang describe him as a capable manager with a deep technical background, according to interviews and public accounts.

“He’s definitely an INTP,” said Zihan Wang, a computer engineer who worked on an earlier DeepSeek model, referring to an introspective personality type from the Myers-Briggs test, a popular personality test among young people in China. “INTPs are really good researchers and they have a willingness to explore,” Mr. Wang said. “He is not one of those people who wants to control everything.”

Mr. Liang was not too bothered with details like project timelines, and occasionally sent thought-provoking research questions to the entire team of researchers, Mr. Wang said. But mostly, Mr. Liang seemed driven to advance the technology and was not focused on profits.

Unlike many Chinese companies, which tend to focus on hiring programmers, Mr. Liang has gained a reputation for employing people from outside of computing. Poets and humanities majors from China’s top universities on DeepSeek’s staff train the model to write classical Chinese poetry and ace questions taken from the country’s difficult college entrance examination.

“Most of the team graduated from the top universities in China,” said Yineng Zhang, a lead software engineer at Baseten in San Francisco who works on the SGLang, a project not part of DeepSeek that helps people build on top of DeepSeek’s system. “They are very smart and very young.”

For years, Chinese tech companies pioneered artificial intelligence applications used in computer vision, like facial recognition. But OpenAI’s release of ChatGPT prompted a reckoning. When no Chinese company immediately released anything comparable, many concluded that American companies had a lead in advanced A.I.

In China, computer scientists were determined to prove they could compete. In 2023, many companies in China released their own large language models, the technology that underpins chatbots like ChatGPT.

But making advanced models would require using a large number of chips that would cost hundreds of millions of dollars.

High-Flyer was spending, too. By 2021, it was one just a handful of Chinese companies that had been able to stockpile more than 10,000 advanced Nvidia A100 chips.

Yet DeepSeek’s research gave it a surprising advantage. Last year, it dramatically cut the prices it charged developers who build applications using its model, prompting a price war with larger rivals.

Mr. Wang, the engineer who previously worked at DeepSeek, said there was little discussion of commercial applications for the technology they were building. Instead, he said, the company was focused on making an A.I. system that could be used by a range of people for many purposes.

“During my time there, we did not talk much about how we make money,” Mr. Wang said. “They just focused on making a great foundation model.”

A crucial part of DeepSeek’s popularity is that it has made its developers’ work public. This kind of information sharing, called open source, has been a cornerstone of the development of computer software, the internet and now artificial intelligence.

In the United States, A.I. researchers and entrepreneurs have long followed the progress of DeepSeek’s technology. Last year, the company turned heads when it released systems designed to generate their own computer programs.

A new challenge for the company may come with its new high profile. The same day it released R1, the model behind its new chatbot, last week, Mr. Liang appeared at a round table discussion with Li Qiang, China’s premier.

DeepSeek’s sudden popularity has thrust it to the center of the Chinese Communist Party’s efforts to spur innovation, and that could prove difficult to manage, said Jimmy Goodrich, a senior adviser for technology analysis to the RAND Corporation, a federally funded think tank. “It’s a big predicament for DeepSeek. I’m sure they weren’t on the government’s five-year plan, he said.

“Can they maintain this chaotic carefree vision when both the party and the world is watching?”

Zixu Wang contributed research from Hong Kong.