OP-Ed: The price of AI unrealism — $1 trillion disappears on US markets as China’s DeepSeek drops in
By Paul Wallis
DIGITAL JOURNAL
January 28, 2025
Chinese firm DeepSeek's artificial intelligence chatbot has soared to the top of the Apple US App Store's download charts, stunning industry insiders and analysts with its ability to match its US competitors - Copyright AFP GREG BAKER
For all the hype, babble, and actual achievements, America’s new cash cow AI has just had a jolt of very expensive reality. Despite the Stargate Project, designed to maintain America’s edge in AI, China’s DeepSeek has just punctured the balloon.
Somehow, no doubt in a flurry of macho meetings for tiresome rodents, the idea of American exclusivity in AI was taken seriously. No form of tech is exclusive and never has been. Fire and the wheel are good examples.
There are hordes of AI businesses trying to create a space for themselves in this market. The highly publicized variety of AI is nothing like the whole story. The next generation of AI hardware is also up for grabs.
Then there’s theft. China is the bogeyman, but does anyone have the inbuilt level of extraordinary stupidity required to believe that nobody else is swiping AI tech?
Tech media has been saying for a long time that the hype has been out of control in the investment markets. Billions of dollars have found obliging rabbit holes in this techno-mythology.
DeepSeek also had the market perceptiveness to bring some credentials with it. DeepSeek is an actual open source AI. It’s also affordable and pretty cheap. Current gossip is that it’s better for technical tasks, while ChatGPT is more chatty… hard to avoid that analogy because it’s a better chatbot.
The markets, meanwhile, had a demure fit. Nvidia, long said to be due for a major correction, corrected itself and accounted for most of the $1 trillion downward move. Other tech stocks were also hit, and tech indices must be feeling pretty queasy, too.
This undignified stampede caused by the mere presence of a credible competitor has a much deadlier if almost too obvious message.
This is a true global market.
America is not the only player.
Big money wants returns.
Investments in AI must deliver hard dollar values.
Another good idea is not bleating about the cost of AI processes and doing something useful, like making them market-ready and cheaper.
One of the reasons for the instant and ongoing extreme skepticism in the tech sector is that this drivel been hyping the wrong things. The chat-related functions are all just large language models hooked up to old software ideas and chatbots. The market has been seeing what it wants to see, as usual.
You can write an essay based on a search, sure. So what? This is almost literally playing with alphabet blocks in kindergarten at a cost of billions of dollars.
The next generation of AI will make a big leap in capabilities. From what I’ve seen, AI analytics are generally pretty good. I have also caught a few indicators of bias. I’d have to see a lot more and cross-check to spend a cent on any of it, but OK-ish.
For example – AI peer review is an interesting option. How does an AI oversight another AI? Does that add a level of difficulty that an AI will respect? If you tell an AI its work will be checked, does it behave differently?
I mention this because the market doesn’t seem to know what constitutes good performance by AI. That’s the incredible weakness DeepSeek has just exposed.
You’re not buying an iPhone, an air fryer, or some showy peripheral.
You’re buying a lot of money’s worth of something, and you don’t know what? Fix that.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
Silicon Valley rattled by low-cost Chinese AI
By AFP
January 27, 2025
Chinese firm DeepSeek's artificial intelligence chatbot has soared to the top of the Apple US App Store's download charts, stunning industry insiders and analysts with its ability to match its US competitors
By AFP
January 27, 2025
Chinese firm DeepSeek's artificial intelligence chatbot has soared to the top of the Apple US App Store's download charts, stunning industry insiders and analysts with its ability to match its US competitors
- Copyright AFP GREG BAKER
Alex PIGMAN
Fears that the AI gold rush could be under threat rocked Wall Street on Monday following the emergence of a ChatGPT-like model from China, triggering predictions of turmoil for Silicon Valley and accusations of cheating.
Last week’s release of the latest DeepSeek model initially received limited attention, overshadowed by the inauguration of US President Donald Trump that took place the same day.
However, over the weekend, the Chinese artificial intelligence startup’s chatbot surged to become the most downloaded free app on Apple’s US App Store, displacing OpenAI’s ChatGPT.
What truly rattled the industry was DeepSeek’s claim that it developed its latest model, the R1, at a fraction of the cost major companies are currently investing in AI development, primarily on expensive Nvidia chips and software.
This development is particularly significant given that the AI boom, ignited by ChatGPT’s release in late 2022, has propelled Nvidia to become one of the world’s most valuable companies.
The news sent shockwaves through the US tech sector, exposing a critical concern: should tech giants continue pouring hundreds of billions into AI investment when a Chinese company can produce a comparable model so economically?
DeepSeek was also a poke in the eye to Washington and its priority of thwarting China by maintaining American technological dominance, which has already led to legislation that could ban TikTok in the United States.
On his first full day in office, Trump last week announced a major AI infrastructure project with OpenAI and Japan’s SoftBank, emhpasizing the competition with China as a key motivator.
Tech investor and Trump ally Marc Andreessen declared “Deepseek R1 is AI’s Sputnik moment,” referencing the 1957 launch of Earth’s first artificial satellite by the Soviet Union that stunned the Western world.
The situation is particularly remarkable since, as a Chinese company, DeepSeek lacks access to Nvidia’s state-of-the-art chips used to train AI models powering chatbots like ChatGPT.
Exports of Nvidia’s most powerful technology are blocked by order of the US government, given the strategic importance of developing AI.
“If China is catching up quickly to the US in the AI race, then the economics of AI will be turned on its head,” warned Kathleen Brooks, research director at XTB, in a note to clients.
Microsoft CEO Satya Nadella, visibly concerned, took to social media hours before markets opened to dismiss concerns about cheaply-produced AI, saying less expensive AI was good for everyone.
But last week at the World Economic Forum in Davis, Nadella warned: “We should take the developments out of China very, very seriously.”
Microsoft, an eager adopter of generative AI, plans to invest $80 billion in AI this year, while Meta announced at least $60 billion in investments on Friday.
– ‘Outplayed’ –
Much of those investments go into the coffers of Nvidia, whose shares plunged as much as a staggering 17 percent on Monday.
Adding to the turmoil, the esteemed Stratechery tech newsletter and others suggested that DeepSeek’s innovations stemmed from necessity, as lacking access to powerful Nvidia-designed chips forced them to develop novel methods.
The blocks are “driving startups like DeepSeek to innovate in ways that prioritize efficiency, resource-pooling, and collaboration,” wrote the MIT Technology Review.
Elon Musk, who has invested heavily in Nvidia chips for his xAI company’s supercluster, suspects DeepSeek of secretly accessing banned H100 chips –- an accusation also made by the CEO of ScaleAI, a prominent Silicon Valley startup backed by Amazon and Meta.
But such accusations “sound like a rich kids team got outplayed by a poor kids team,” wrote Hong Kong-based investor Jen Zhu Scott on X.
Alex PIGMAN
Fears that the AI gold rush could be under threat rocked Wall Street on Monday following the emergence of a ChatGPT-like model from China, triggering predictions of turmoil for Silicon Valley and accusations of cheating.
Last week’s release of the latest DeepSeek model initially received limited attention, overshadowed by the inauguration of US President Donald Trump that took place the same day.
However, over the weekend, the Chinese artificial intelligence startup’s chatbot surged to become the most downloaded free app on Apple’s US App Store, displacing OpenAI’s ChatGPT.
What truly rattled the industry was DeepSeek’s claim that it developed its latest model, the R1, at a fraction of the cost major companies are currently investing in AI development, primarily on expensive Nvidia chips and software.
This development is particularly significant given that the AI boom, ignited by ChatGPT’s release in late 2022, has propelled Nvidia to become one of the world’s most valuable companies.
The news sent shockwaves through the US tech sector, exposing a critical concern: should tech giants continue pouring hundreds of billions into AI investment when a Chinese company can produce a comparable model so economically?
DeepSeek was also a poke in the eye to Washington and its priority of thwarting China by maintaining American technological dominance, which has already led to legislation that could ban TikTok in the United States.
On his first full day in office, Trump last week announced a major AI infrastructure project with OpenAI and Japan’s SoftBank, emhpasizing the competition with China as a key motivator.
Tech investor and Trump ally Marc Andreessen declared “Deepseek R1 is AI’s Sputnik moment,” referencing the 1957 launch of Earth’s first artificial satellite by the Soviet Union that stunned the Western world.
The situation is particularly remarkable since, as a Chinese company, DeepSeek lacks access to Nvidia’s state-of-the-art chips used to train AI models powering chatbots like ChatGPT.
Exports of Nvidia’s most powerful technology are blocked by order of the US government, given the strategic importance of developing AI.
“If China is catching up quickly to the US in the AI race, then the economics of AI will be turned on its head,” warned Kathleen Brooks, research director at XTB, in a note to clients.
Microsoft CEO Satya Nadella, visibly concerned, took to social media hours before markets opened to dismiss concerns about cheaply-produced AI, saying less expensive AI was good for everyone.
But last week at the World Economic Forum in Davis, Nadella warned: “We should take the developments out of China very, very seriously.”
Microsoft, an eager adopter of generative AI, plans to invest $80 billion in AI this year, while Meta announced at least $60 billion in investments on Friday.
– ‘Outplayed’ –
Much of those investments go into the coffers of Nvidia, whose shares plunged as much as a staggering 17 percent on Monday.
Adding to the turmoil, the esteemed Stratechery tech newsletter and others suggested that DeepSeek’s innovations stemmed from necessity, as lacking access to powerful Nvidia-designed chips forced them to develop novel methods.
The blocks are “driving startups like DeepSeek to innovate in ways that prioritize efficiency, resource-pooling, and collaboration,” wrote the MIT Technology Review.
Elon Musk, who has invested heavily in Nvidia chips for his xAI company’s supercluster, suspects DeepSeek of secretly accessing banned H100 chips –- an accusation also made by the CEO of ScaleAI, a prominent Silicon Valley startup backed by Amazon and Meta.
But such accusations “sound like a rich kids team got outplayed by a poor kids team,” wrote Hong Kong-based investor Jen Zhu Scott on X.
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