AI firms follow DeepSeek’s lead, create cheaper models with “distillation”

The technique caught attention after DeepSeek used it to build AI models based on open source systems released by competitors Meta and Alibaba Credit: FT montage/Getty

Leading artificial intelligence firms including OpenAI, Microsoft, and Meta are turning to a process called “distillation” in the global race to create AI models that are cheaper for consumers and businesses to adopt.

The technique caught widespread attention after China’s DeepSeek used it to build powerful and efficient AI models based on open source systems released by competitors Meta and Alibaba. The breakthrough rocked confidence in Silicon Valley’s AI leadership, leading Wall Street investors to wipe billions of dollars of value from US Big Tech stocks.

Through distillation, companies take a large language model—dubbed a “teacher” model—which generates the next likely word in a sentence. The teacher model generates data which then trains a smaller “student” model, helping to ...