Hangzhou: The city behind DeepSeek’s rise and why it’s just the beginning
Why there could be 100x more DeepSeeks on the way
DeepSeek has arguably been the biggest bomb in both the AI and investment worlds in recent weeks. This Chinese AI startup, a side project of a quantitative hedge fund, has sent shockwaves through the global AI industry with its open-source LLM that rivals OpenAI's o1 in performance, yet operates on a fraction of the budget. Its success even triggered a sell-off in the U.S. semiconductor stocks, with Nvidia losing 17% of its market value in just one day.
But did you know this isn’t just a story about one outlier? To outsiders, DeepSeek might seem like a rare success story in China, one that’s unlikely to be repeated. However, here’s the often overlooked truth: DeepSeek isn’t an outlier—it's a product of a business environment that’s fostering more potential disruptive innovations. And that environment is Hangzhou, the city and capital of Zhejiang province.
Hangzhou isn’t just the home of DeepSeek; it’s a city that thrives on innovation. While many know it as the birthplace of Alibaba (NYSE: BABA) and NetEase (NASDAQ: NTES), Hangzhou’s tech ecosystem extends far beyond e-commerce and the internet. The city is a breeding ground for cutting-edge companies in AI, robotics, gaming, and hard tech. For example, it’s the birthplace of Black Myth: Wukong, a blockbuster game of 2024 that has captivated global audiences with its stunning visuals and storytelling. It also hosts companies like Unitree, which launched multiple humanoid robots that sparked global attention after Elon Musk shared their videos, and BrainCo, which is innovating in brain-machine interface products and smart prosthetics.
Amid a nationwide population decline, Hangzhou has seen a steady net inflow of people for nine consecutive years as of 2024. However, many of the founders behind these successful unicorns were not born and raised in Hangzhou. So, how did the city manage to transform itself into a hub of innovation? What makes Hangzhou such a powerhouse?