I think there is a bit more going on than that. Basically, everything in AI is an accelerated race to the bottom. DeepSeek scared a lot of people because the model's history is actually quite interesting.
DeepSeek was original an algo for a hedge fund, but the guy says he got a bit altruistic about it. However, when R1 hit it kind of shocked people because it used reinforced learning so well at such a reduced cost to train because you don't need these stupidly large datasets. They went on to do something even more interesting. When training a model of a different size, you would generally simply run all the training data through the smaller model to get a reduced set of weights. There is also work in quantizing, but this is a bit tangential. DeepSeek came up with the idea of using a larger model that used a combination of training data+RL to give a more guided instruction to smaller models and in doing so achieved better results than simply throwing all the training data at it again. As far as I understand, the "pure RL" approach DeepSeek used was a first in the field for LLMs (though it had been used previously with AI like AlphaGo).
This is what the search engines are looking for or so I believe. They want a way to take the power of an AI and likely cache the results, use a mix of different model sizes, and other approaches to find their own niche. A question like "How many moons are there in our solar system? Cache that response and send it out to any similar query (including all misspellings). I would be bet with some inventive efforts like this most providers could reduce 10 fold the actual amount of times a query in the search leads to a prompting an AI and burning the cycles. More so they feel they must find their niche because AI is going to rule the world -- or that's the prevailing idea among these companies.
I tried to poke around on DeepSeek's website. There isn't even a place I can find where I can pay for the service. All the data is open source. It's blazing fast. But yes, they are using my data (which I don't care about really). I can download the abliterated/obliterated model (kind of like uncensored) and run it in LM studio on a nice gaming rig with token output rates being as fast as I can read and none of my data leaves my machine (if I want).
I haven't seen a huge breakdown of costs for AI companies, but I think most the cost/energy is being spent on training models. If you poke around on hugging face, you will find all kinds of wacky models. I found one the other day called LeanlyAI which is just designed to help doctors and weight loss patients with the full scope of all questions related to losing weight be it physical or mental challenges. You will fine tons for porn both written and graphic. Agentic models take this to the next step where every input/response needs to lead to another query/prompt so your agent can do it's "work". Estimates for an active and optimized agent, say roughly 10M tokens a day and about $10. Consider a whole company working like that with their own agents. The amount of cost for search queries to go through a well-configured LLM seems like pissing in the ocean compared to this "madness".
The "end game" is the same as the rat race has always been. There are lots of interesting AI tools and ideas. Though I haven't yet started running my own agents, you can do almost all this at minimum cost (open claw can easily be configured with a local LM Studio instance). But I think lots of this is just FOMO and my point is maybe there is something here that is significant for the future of computing but if so, most of it is the developments by the open-source community.
One other fun caveat. Hugging face is actually blocked in China. They have their own HF-mirror that is clearly Chinese run and still has all the dirty stuff lingering on the website (for now). China has been hugely cracking down on AI sex chat bots and AI generated porn. People were advertising on Taobao (Chinese Amazon) that they can teach you how to make money generating AI porn. So basically, for all the "rush" American companies are doing to get into this area. The culture in China has likely already leaped quite far ahead in training models and wide-spread adoption.