Continued investment in artificial intelligence infrastructure is needed despite DeepSeek challenging the cost efficiency of large language models, said Robin Li, co-founder and CEO of Chinese tech heavyweight Baidu Inc.

The investment in areas such as chips, data centers and cloud infrastructure remains crucial for coming up with the next best model, Li said at the World Governments Summit held in Dubai, the United Arab Emirates, on Tuesday.

"When technology is still evolving at such a rapid rate, you just cannot stop investing. You have to invest to make sure that you are at the very front of this technological innovation or revolution," Li said.

Li's comments come as Chinese AI startup DeepSeek has captured global attention with its cost-effective and open-source model R1. The performance of the latest AI model is on a par with leading models from OpenAI, but at only a fraction of the cost and computing power of its foreign peers, raising questions about the necessity of massive AI infrastructure spending.

He noted that DeepSeek's emergence demonstrates that innovation thrives in environments that nurture experimentation and curiosity. "Innovation can't be planned. You don't know when and where the innovation comes," he said. "What you can do is just to foster an environment that is conducive to innovation."

Baidu was among the first companies in China to launch its AI model Ernie Bot in March 2023 after OpenAI unveiled ChatGPT in November 2022.

Li said he remained "optimistic about the future of AI", as even at the current level, large language models can create significant value across a range of scenarios, adding that the inference cost of foundation models basically can be reduced by more than 90 percent over 12 months.

"If you can reduce the cost by a certain percentage, then that means your productivity increases by that kind of percentage. I think that's pretty much the nature of innovation," Li added.