A Chinese startup's development of a highly competitive AI model at a fraction of the cost of Western counterparts has sent shockwaves through the global tech sector, triggering a sell-off in U.S. technology stocks. DeepSeek's impressive achievements raise questions about the efficiency of investments made by major tech companies and the potential for disruption in the AI landscape.
U.S. technology firms experienced a sharp decline in premarket trading as the emergence of Chinese startup DeepSeek ignited concerns regarding competitiveness in the artificial intelligence (AI) sector and the potential erosion of America's leading position.
DeepSeek's launch of a free, open-source large-language model in late December, reportedly developed in just two months at a cost of less than $6 million, has raised questions about the substantial financial investments made by major tech companies in AI models and data centers.The company's rapid development and relatively low cost stand in stark contrast to the significant expenditures required by Western counterparts. Last week, DeepSeek unveiled a reasoning model as well, further fueling speculation about the efficiency of its AI development process. This has prompted analysts to scrutinize the financial strategies of established tech giants, particularly in light of DeepSeek's impressive performance.Semiconductor analyst Srini Pajjuri of Raymond James noted that DeepSeek, despite lacking the extensive computing resources of U.S. hyperscalers, managed to create a model that appears highly competitive. Pajjuri suggested that DeepSeek's success could incentivize U.S. hyperscalers, such as major cloud computing providers, to leverage their advantage in accessing graphics processing units (GPUs) to maintain their edge. GPUs are crucial for training large AI models, and Nvidia dominates the GPU market. Analysts at Bernstein, while acknowledging the potential challenge posed by DeepSeek, expressed skepticism regarding the claimed development cost, arguing that it likely excluded expenses related to previous research and experimentation. They emphasized that DeepSeek's models, while impressive, are not without limitations and that the concerns about the demise of the existing AI infrastructure are exaggerated
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