DeepSeek’s artificial intelligence models rocked the financial markets earlier this week as Wall Street potentially recalculates massive investments in the new tech field.
The Chinese upstart was the centerpiece of Meta’s and Microsoft’s Jan. 29 earnings reports and will likely play an outsized role in other upcoming conference calls among the industry’s titans.
With DeepSeek’s artificial intelligence (AI) potentially proving that its technology can mirror or outperform its competitors at a fraction of the cost and resources, Big Tech will remain on the defense regarding its overall AI spending initiatives of the past couple of years.
Meta will not slow down investing in AI capabilities, says Meta CEO Mark Zuckerberg. The social media giant shrugged off the implications of DeepSeek and vowed to invest approximately $65 billion in the new technology, calling it a “strategic advantage.”
“It’s possible that we’ll learn otherwise at some point, but I just think it’s way too early to call that, and at this point, I would bet that the ability to build out that kind of infrastructure is going to be a major advantage.”
While it may be premature to conclude whether DeepSeek will have lasting impacts on the AI ecosystem, Zuckerberg noted that the overseas company’s open-source language model supports Meta’s broader open-source initiative.
“There’s going to be an open-source standard globally,” he said. “For our own national advantage, it’s important that it’s an American standard.”
Meta beat market estimates in the fourth quarter, sending shares higher.
Microsoft announced that it incorporated DeepSeek’s R1 artificial intelligence model into the Azure cloud-computing ecosystem. The AI model will also be accessible for GitHub developers and soon be available to Co-Pilot+ PC users.
Satya Nadella, Microsoft CEO and chair, touted some of DeepSeek’s “real innovations.”
This is far higher than the $6 million that DeepSeek said it spent to develop its AI model.
Nadella defended the spending as necessary to eliminate capacity limitations.
“As AI becomes more efficient and accessible, we will see exponentially more demand,” he said.
Examining the AI Boom
DeepSeek triggered a market meltdown during the Jan. 27 trading session, with the tech-heavy Nasdaq Composite Index plummeting by about 3 percent.Market watchers called this an overreaction among traders.
“Most investors have chosen to ’shoot first, ask questions later,'” said Bob Lang, president of Aztec Capital.
At the same time, it was also a moment for markets to examine all available information and determine if they have been overestimating AI spending. After years of hype, investors are looking for solid returns from the industry juggernauts’ enormous and continued investments.
A cohort of analysts, meanwhile, is bullish because the latest developments in AI will eventually lower costs and stimulate business and consumer demand.
DeepSeek’s advancements highlight the need for more infrastructure, and a reduction in prices will facilitate ubiquitous adoption, says Jan Szilagyi, CEO and co-founder of Reflexivity. While the industry has dedicated immense capital to developing AI models since the ChatGPT craze three years ago, lower costs will bolster commercial usage.
“Every hedge fund will want to have its internal workflows, at least in part, powered by AI, and as the cost comes down, so will retail investors,” Szilagyi told The Epoch Times.
“The ability to match current OpenAI capability at lower capital cost means the pace of development will pick up and capital allocated for AI (StarGate, etc.) will likely see even more ‘bang for the buck.’”
John Belton, portfolio manager at Gabelli Funds, believes that DeepSeek demonstrated new strategies for optimizing AI spending that had not previously been pursued.
‘Hot on Our Heels’
Speaking to House Republicans at a Jan. 27 gathering, President Donald Trump said that DeepSeek should serve as a “wakeup call” for U.S. tech companies.Commerce secretary nominee Howard Lutnick is not convinced that DeepSeek’s “dirt cheap” AI model was “done aboveboard.” Instead, he says, it was achieved by leveraging stolen U.S. technology, advanced semiconductors, and other intellectual property.
“If they are going to compete with us, let them compete—but stop using our tools to compete with us,” Lutnick said.
“How could it be more clear than this week when DeepSeek, a Chinese AI, says they were able to create things direct cheap? How? By leveraging what they’ve taken from us. It’s outrageous, and it needs to be addressed.”
Still, even as the federal government clamps down on Beijing, the world’s second-largest economy is “catching up really fast” in AI development, according to David Sacks, Trump’s AI and crypto czar.
“They are kind of hot on our heels here, and I think we basically have somewhere between a three- and six-month lead on them. But they are catching up very, very fast,” Sacks said in an interview with Fox News on Jan. 29.