Investing.com– Meta Platforms Inc (NASDAQ:META) is on high alert as DeepSeek, a conversational AI developed by a Chinese hedge fund, challenges its dominance in artificial intelligence, The Information reported on Sunday citing two Meta employees familiar with internal discussions.

Meta’s AI leaders, including infrastructure director Mathew Oldham, have expressed concerns that the upcoming version of Meta’s Llama AI may fall short compared to DeepSeek’s groundbreaking performance, the report stated.

DeepSeek has quickly gained attention for outperforming established AI systems like OpenAI’s GPT models and Meta’s Llama, while operating at a fraction of their costs.

Its development raises significant capital expenditure (capex) questions for AI companies investing heavily in expensive infrastructure to support their models.

Meta, like its competitors, has spent billions on AI advancements, including scaling computational resources and optimizing model training. However, DeepSeek’s ability to achieve similar or better results with lower costs has raised concerns about the sustainability of such heavy investments.

Smaller firms aiming to compete in the AI space may face further challenges, as DeepSeek sets a new standard for cost-effective innovation.

The competition underscores the shifting landscape of AI development, where performance is no longer the sole metric of success. Cost efficiency and accessibility are becoming increasingly critical, putting pressure on industry leaders like Meta, NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT), Alphabet, (NASDAQ:GOOG) and other tech leaders.