Almost overnight, DeepSeek has upended many of the assumptions inside Silicon Valley about the economics of building AI, as well as the best technical methods for developing the technology and the extent of the US lead over competitors in China. For much of the past two-plus years since ChatGPT kicked off the global AI frenzy, the industry has bet that the path to better AI depends largely on spending heavily on more advanced chips from companies like Nvidia Corp. and increasingly massive data centers to house them.
US President Donald Trump welcomed the development as “good, because you don’t have to spend as much money.” Industry leader Nvidia, whose shares took a huge hit from DeepSeek’s debut, also lauded it as an “excellent AI advancement” in a statement on Monday.
The market fallout was staggering. Hype over DeepSeek’s feat drove a nearly $1 trillion rout in US and European technology stocks on Monday as investors questioned the spending plans of some of America’s biggest companies. The share plunge in AI chipmaker Nvidia alone erased roughly $589 billion in market value, the biggest wipeout in US stock-market history.
Meanwhile, in DC, lawmakers are left to figure out the best route to beat back China’s progress on a technology some see as crucial to its military and economy, given the Biden administration’s chip export curbs were not enough. David Sacks, President Donald Trump’s crypto and AI czar, said DeepSeek shows the global AI race will be very competitive — while blaming the Biden administration for regulation that “hamstrung” AI development.
Further complicating matters, the renewed uncertainty over large AI investments comes just days after Trump championed a $100 billion joint venture from OpenAI, SoftBank Group Corp. and Oracle Corp. to boost US competitiveness by investing in data centers and other physical infrastructure. Now, there are new questions about the rationale for stratospheric AI budgets.
The censorship part here is eerie. Had a physical reaction while reading that.
— Emily Binder (@emilybinder) January 28, 2025
Bloomberg: DeepSeek Challenges Everyone’s Assumptions About AI Costs https://t.co/8ewlGlxrkD pic.twitter.com/0R1ns25aoM
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