On Monday, rumblings of a new AI chat program DeepSeek-R1 led to a $1 trillion dollar stock selloff. ONE TRILLION DOLLARS. I am sure this led to some tough conversations in many tech conference rooms. Some may be questioning their purpose in life, possibly their very own existence, and definitely how they do business.
What is DeepSeek?
DeepSeek-R1 is a large language model similar to ChatGPT. It is developed by the Chinese company DeepSeek, which was founded in 2023.
Why would people sell their stocks over it?
Because its so cheap! Like 20 times cheaper.
You know how it is when you’re used to buying brand name because you swear it is better, But one day you’re light on money, so you try the generic and you realize its just about as good as the name brand. You like saving money, so you switch to the generic. If enough people like saving money and switch to the generic, then the store probably doesn’t buy as much of the name brand product. The name brand product may end up losing money due to so many switching to the generic.
Well, investors who buy tech stocks are betting a lot of people and companies will switch to the cheaper generic. Or maybe try to make their own. Either way, investors are concerned that the name brand tech companies are going to lose money. DeepSeek upended all sorts of plans. They demonstrated that something similar to ChatGPT could be made a whole lot easier and with a lot less money
How will American Tech Regroup?
Also, half of what was just wiped off the markets was proposed just last week to spur AI innovation in the US. I talked about it in my last post. Now that their stocks have suffered, do tech companies still have the money to invest? Does this change how they invest if the fancy chips aren’t really needed? Some companies were planning their own nuclear power plants. Is all that really necessary if they don’t need such powerful models?
Unless of course all those expensive models truly are necessary? Questions are starting to arise over how DeepSeek trained its models. I hope to explore this more in a later post.
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