Just when tech giants thought they had an ever-flowing stream of investor money to count on, along comes DeepSeek, a Chinese AI startup, to shake things up. And now, the big tech CEOs are scrambling to reassure investors that this isn’t the end of the world—or their multi-billion-dollar AI investments.
Let’s start with Sam Altman, the CEO of OpenAI. In a recent post on X, he called DeepSeek’s R1 model “an impressive model, particularly around what they’re able to deliver for the price.” But don’t worry, folks, because he quickly added that OpenAI will “obviously deliver much better models” and “pull up some releases”. Translation: “Sure, DeepSeek is good, but we’re still the best, and we’ll prove it by throwing more money at the problem.” Altman emphasized that OpenAI’s current strategy, which will require billions of dollars of investments into cloud resources, is the right path forward.
Then there’s Satya Nadella, Microsoft’s CEO, who decided to drop some economic theory on us. He referenced the Jevons paradox, which explains why an increase in efficiency leads to an increase in consumption. “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of,” Nadella posted on X. In other words, “Don’t worry about DeepSeek; the more AI there is, the more we’ll all need, and we’ll still be rolling in cash.” Nadella also mentioned that Microsoft plans to spend a massive $80 billion in its current fiscal year on AI datacenters.
Nvidia, the chipmaker that supplies the hardware for these AI models, also chimed in. An Nvidia spokesperson told CNBC that DeepSeek is “an excellent AI advancement and a perfect example of Test Time Scaling”. They went on to explain how new models can be created using widely-available models and compute that is fully export control compliant. Translation: “DeepSeek is great, but we’re still the kings of AI hardware, so keep buying our chips.”
Meanwhile, the stock market is having a meltdown. The Nasdaq 100 index sank more than 3%, and Nvidia’s market cap took a historic hit. Investors are panicking, and the tech CEOs are doing their best to calm the storm. But let’s be real—this is just another chapter in the never-ending saga of tech hype and market volatility.
DeepSeek’s development model is truly disruptive, posing a significant challenge to the notion of US-based AI exceptionalism. By delivering high-quality AI models at a fraction of the cost, DeepSeek has exposed the inefficiencies and inflated budgets of Silicon Valley’s AI giants. It’s a wake-up call that perhaps the billions of dollars poured into AI development by US companies haven’t been as necessary as they claimed.
Looking at you, Microsoft and your plans to relaunch a failed nuclear plant in hopes of fueling Copilot in the future.
This disruption also signals the potential end of the AI hype cycle. For years, US-based companies have touted their AI advancements as the pinnacle of technological innovation, justifying massive investments and sky-high valuations. But with DeepSeek’s emergence, the narrative is shifting. Investors are beginning to question whether the exorbitant spending on AI by US companies is truly justified, or if they’ve been bilked by overhyped promises.
The reality is that DeepSeek’s lean and efficient approach to AI development could set a new standard, forcing US companies to reevaluate their strategies and budgets. The days of unchecked spending and unquestioned dominance in the AI space may be coming to an end. And as the dust settles, it will be interesting to see how Silicon Valley adapts to this new landscape.
So, what’s the takeaway here? The big tech CEOs want you to believe that DeepSeek is just a blip on the radar, not a reason to rethink your AI investments. They’re confident that their massive budgets and cutting-edge technology will keep them ahead of the game. But as always, only time will tell if they’re right or if DeepSeek is the beginning of a new era in AI.
Ah, the delightful irony! DeekSeek, inadvertently, will be taking the jobs of AI developers who were developing tools to take human jobs.
Be careful what you wish for.
