Speaker 1: Bloomberg Audio, Studios, podcasts, radio news.
Speaker 2: Investors woke up this morning to seismic losses for US
Speaker 2: tech stocks.
Speaker 3: Just creating a massive drag hundreds of billions of dollars
Speaker 3: in market cap loss.
Speaker 2: The Nasdaq fell as much as five point two percent
Speaker 2: in overnight trading. Is Naszak futures and global tech stocks
Speaker 2: extend their losses on fear of the AI race may
Speaker 2: no longer be America's to lose. By the close of
Speaker 2: a wild trading day, and Nvidia's stock fell by seventeen percent,
Speaker 2: The chip maker saw five hundred and eighty nine billion
Speaker 2: dollars erased from its market valuation, breaking its own record
Speaker 2: for the biggest single day loss of market value on
Speaker 2: the US Stock Exchange, and energy firms expected to profit
Speaker 2: from AI demand sank two, led by a twenty one
Speaker 2: percent drop in the share price of Constellation Energy Core.
Speaker 3: This is a really stunning development, kind of coming out
Speaker 3: of aware for the AI world.
Speaker 2: This stunning development came in the form of a new
Speaker 2: AI competitor, a Chinese company called deep Seek. Jackie Devalos,
Speaker 2: who covers artificial intelligence for Bloomberg, says deep Seek has
Speaker 2: disrupted the AI world by building a model that rivals
Speaker 2: its competitors using a lot fewer resources.
Speaker 3: Tech companies spend billions of dollars at this point on
Speaker 3: training their AI models, And you had Meta last week
Speaker 3: saying that it would spend upwards of sixty five billion
Speaker 3: this year on AI development, So it's a lot of money.
Speaker 2: Deep Sea claims it's spent closer to six million dollars
Speaker 2: to train its most recent model, and it's made its
Speaker 2: system open source, meaning anyone can access its code and
Speaker 2: build on it in a matter of days. The company's chatbot,
Speaker 2: which functions similarly to chat GPT, has rocketed to the
Speaker 2: top of App store charts, and its sudden dominance has
Speaker 2: some investors questioning the strategies and the valuations of the
Speaker 2: US tech companies that are developing AI and the technology
Speaker 2: that powers it.
Speaker 3: And I think deep Seek is now putting a really
Speaker 3: big focus on what can you come up within the
Speaker 3: short term or are we just wasting our money here?
Speaker 2: This is the big take from Bloomberg News. I'm Sarah
Speaker 2: Holder today on the show The Rise of deep Seek.
Speaker 2: How it could upend the USAI industry's competitive advantage or
Speaker 2: push it to innovate. It's not what deep seek does
Speaker 2: that's so revolutionary. Functionally, it's actually very similar to a
Speaker 2: lot of other AI chatbots.
Speaker 3: Yeah, it's a large language model that can handle reasoning,
Speaker 3: and you can put in a question, it gives you answer.
Speaker 3: Anyone can go to the app store and download it.
Speaker 3: If you're a student looking for help on your essay,
Speaker 3: or if you're a researcher looking to help on your
Speaker 3: PhD dissertation, the same people that kind of go to
Speaker 3: a chat GBT or an anthropics clod or a Google Gemini.
Speaker 3: It's general purpose. And what you're also going to start
Speaker 3: seeing is the coding community really delve into this. They're
Speaker 3: kind of one of the bigger cohorts that are early
Speaker 3: adopters of this because it is so crucial for coding.
Speaker 3: It takes a lot of the mundane tasks from coding
Speaker 3: out of the picture.
Speaker 2: Why was deep Seek's rise seemingly such a surprise to
Speaker 2: so many people.
Speaker 3: Part of the surprise was that this startup sort of
Speaker 3: came out of nowhere. It was founded in twenty twenty
Speaker 3: three by a guy that used to run a hedge fund,
Speaker 3: and it was kind of this spin out out of
Speaker 3: this hedge fund and it really didn't come onto the
Speaker 3: scene until this year when it released this model that
Speaker 3: when it performed on benchmarks, it was pretty comparable to
Speaker 3: what we've seen out of open AI and Thropic and
Speaker 3: other leading models. And so part of the surprise was
Speaker 3: how were they able to do this so quickly and
Speaker 3: once we started seeing reports that not only was it faster,
Speaker 3: but it was actually done at a.
Speaker 1: Fraction of the cost.
Speaker 3: Remember, it's taken billions of dollars for these huge AI
Speaker 3: companies to build and train and release these AI models
Speaker 3: that power the chatbots that we all play around with.
Speaker 2: Deepseek has said it spent only five point six million
Speaker 2: dollars to train its latest AI model, though it also
Speaker 2: cautioned that that figure didn't include all their costs, and
Speaker 2: since it needs less computing power, it could have significantly
Speaker 2: lower energy needs.
Speaker 1: How did this.
Speaker 2: Young startup develop this product so cheaply, Well, part.
Speaker 3: Of it has to do with its roots as coming
Speaker 3: out of this quantitative hedge fund, so it has this
Speaker 3: deep knowledge in this computational framework. And not to get
Speaker 3: too into the weeds, but deep Seak has focused on
Speaker 3: what it calls maximizing software driven optimization. Basically, what is
Speaker 3: able to do is create an architecture that ran more efficiently,
Speaker 3: that didn't need these really intensive chips that are essential
Speaker 3: for the models that run open Ai and Google and
Speaker 3: Meta Islama. And it did this because there's been export
Speaker 3: controls on chips going to China to prevent fresh AI
Speaker 3: startups from coming about and challenging US dominance. And so
Speaker 3: what we saw deep Seek do is kind of get
Speaker 3: around these export controls by focus its models to run
Speaker 3: in a different way, kind of in a different sort
Speaker 3: of architecture. And Nvidia's H one hundreds obviously have propelled
Speaker 3: the company.
Speaker 1: To new heights, but those are really.
Speaker 3: Expensive, so the fact that deep Seek doesn't have to
Speaker 3: rely as much on them kind of takes a huge
Speaker 3: chunk of that cost out.
Speaker 2: When was deep Seek released and then when did it
Speaker 2: start getting so popular.
Speaker 3: Deep Seek was founded in twenty twenty three, but we
Speaker 3: really started to see it make a splash in the
Speaker 3: AI world when it released a report that outlined its
Speaker 3: performance against other AI companies.
Speaker 2: What stood out to investors in those reports.
Speaker 1: You know, it performed really well.
Speaker 3: So its latest model reasoning capabilities were similar to that
Speaker 3: of chat GPT. Deep Seek also said that it's better
Speaker 3: at various tax including coding and math and and chat
Speaker 3: GPT is sort of this leader in conversational AI. It's
Speaker 3: pretty versatile, but deepseeak really targets more specific application that
Speaker 3: developers might be looking for that are more customize and
Speaker 3: cost effective.
Speaker 1: You still lack some of that, you know, polish.
Speaker 3: It's not as polished as you might see a chat GPT,
Speaker 3: but in terms of its speed and just the way
Speaker 3: that it's able to handle a complex question or query
Speaker 3: is really surprising given you know, this company was just
Speaker 3: founded about a year ago.
Speaker 2: So when deep seak rose to the top of the
Speaker 2: app charts, when it released this information showing how it worked,
Speaker 2: how it's performing, it had the seismic impact on US markets.
Speaker 2: What do experts think about the market reaction? Was it
Speaker 2: overblown appropriate?
Speaker 3: I think you're seeing some market experts issue and I
Speaker 3: told you so that there was reason to doubt that
Speaker 3: so many billions being poured into.
Speaker 1: The space was justified.
Speaker 3: You also have other experts kind of saying, hold up,
Speaker 3: let's wait and see what this startup is all about.
Speaker 1: We need to look under the hood.
Speaker 3: These are just the first initial days of getting to
Speaker 3: compare what deep Seeks model does how much more runway
Speaker 3: has to go as well.
Speaker 1: If you remember the early.
Speaker 3: Days of CHATGBT felt like we've never seen anything like
Speaker 3: it before, and so I do think people are still
Speaker 3: trying to wrap their heads around how good is this model.
Speaker 2: They're also trying to figure out whether deep seeks reports
Speaker 2: of lower costs and greater efficiency are as impressive as
Speaker 2: they initially seen.
Speaker 3: You look at the other AI companies open Ai and
Speaker 3: Meta and Google, their models take a longer time to
Speaker 3: come out.
Speaker 1: They're big tech giants.
Speaker 3: They're naturally going to move a little bit slower when
Speaker 3: it comes to releasing their technology to the billions.
Speaker 1: Of people it has captive already.
Speaker 3: And that's the benefit of being a small startup that
Speaker 3: you get to release things quicker and make a big splash.
Speaker 1: But whether that splash really has legs, whether it lasts, is.
Speaker 3: Still yet to be seen, and I think that's what
Speaker 3: many people in the AI field are wondering about.
Speaker 2: On January twenty fourth, deep Seat got a high profile
Speaker 2: not of approval when Mark Andresen posted on x that
Speaker 2: the company's latest version is quote one of the most
Speaker 2: amazing and impressive breakthroughs he's ever seen once.
Speaker 3: He tweeted that coming from a tech titan like himself,
Speaker 3: he is very familiar with the AI space his firm,
Speaker 3: and Resent Horowitz is a big investor in AI companies,
Speaker 3: and so kind of getting his shock and awe at
Speaker 3: how good this Deep Seek model was, I think sent
Speaker 3: further reverberations throughout the.
Speaker 2: Market coming up. What is the emergence of this Chinese
Speaker 2: firm mean for US dominance in artificial intelligence? And could
Speaker 2: Deep Seek's ultra low cost model put pressure on soaring
Speaker 2: American AI budgets. The US has been a clear leader
Speaker 2: in the artificial intelligence space, a position it's tried to
Speaker 2: protect by restricting the sale of AI chips and technology abroad.
Speaker 2: So I asked Bloomberg's Jackie Devalos how American policymakers might
Speaker 2: react to the China based Deep Seeks rise.
Speaker 3: I think it's an opportunity for people to take a
Speaker 3: step back and evaluate.
Speaker 1: Kind of where we are now, what.
Speaker 3: It's taken, the level of investment, and ultimately what people
Speaker 3: want to see going forward. A lot of the attention
Speaker 3: right now, especially going into this new administration with President
Speaker 3: has been around national competitiveness against adversaries like China. And
Speaker 3: it really is shocking when you consider the fact that
Speaker 3: the US has done a lot of work to make
Speaker 3: sure it can restrict the supply of these high powered
Speaker 3: chips to China, citing these national security concerns, and then
Speaker 3: you have deep Seak coming onto the scene, which means
Speaker 3: that they were able to achieve this low cost model
Speaker 3: without relying on these high power chips.
Speaker 1: So clearly there was a work around.
Speaker 3: Here that the AI community missed, but also the US
Speaker 3: missed well.
Speaker 2: Right the fact that deep Seek was developed so cheaply
Speaker 2: for millions, not billions, What kind of pressure does that
Speaker 2: put on US companies and their spending. Are they going
Speaker 2: to try and adopt any of the strategies that deep
Speaker 2: Seek used to bring those costs down.
Speaker 3: That's an open question because we've already seen a lot
Speaker 3: of concern about the supply of chips. Are we getting enough,
Speaker 3: are we getting them fast enough? Who are they going
Speaker 3: to in Vidias coming out with new models. Then you
Speaker 3: have in Vidia competitors coming out with new models, and
Speaker 3: so this deep Seek development really raises the question of well,
Speaker 3: wait a second, do we need this many chips to
Speaker 3: begin with? You might see AI companies get more creative
Speaker 3: in how they're building these models, perhaps changing up their
Speaker 3: architecture and framework. You might see investors starting to perhaps
Speaker 3: dole out less money and demand that you know, they
Speaker 3: find other cheaper ways to make this. So I think
Speaker 3: it's all going to start kind of coming together with
Speaker 3: a bit more urgency now that we know that clearly
Speaker 3: this Chinese competitor is giving US companies a run for
Speaker 3: their money.
Speaker 2: Could this be good news for the AI industry overall
Speaker 2: if it pushes this kind of innovation and investment, or
Speaker 2: does it feel like more of a threat.
Speaker 1: I think it depends on who you are.
Speaker 3: If you're the US government, and this definitely feels more
Speaker 3: like a threat. If you are an innovator who is
Speaker 3: enthralled by reading through some of these technical reports that
Speaker 3: Deep Seek put out, it's a really exciting time, and
Speaker 3: I think if you're an AI company, then this is
Speaker 3: a good time to perhaps like light a fire under
Speaker 3: everyone and say, hey, how can we be more creative.
Speaker 3: I think investors are always far more sensitive to these
Speaker 3: things than.
Speaker 1: Perhaps the industry itself.
Speaker 3: But on the whole, I think we're going to see
Speaker 3: far more urgency in releasing products, trying out new features,
Speaker 3: kind of keeping people engaged, because the more people use this,
Speaker 3: the more data goes in, the better these models get.
Speaker 2: By Monday afternoon, and Video released a statement calling deep
Speaker 2: Seek an excellent AI advancement, one that would require a
Speaker 2: lot of in video products in the future. Microsoft ce
Speaker 2: Satya Nadella also reacted with a post on LinkedIn, saying
Speaker 2: as AI gets more efficient and accessible, we will see
Speaker 2: it's use skyrocket, turning it into a commodity we just
Speaker 2: can't get enough of. So Deepseek has this edge, the
Speaker 2: edge being it can do all this a lot cheaper
Speaker 2: than competitors. Did you expect to see such a strong
Speaker 2: reaction in the markets, this intense of a reaction.
Speaker 3: This intensive a reaction, is a huge surprise, because the
Speaker 3: evidence that this AI startup might dethrone the leading AI
Speaker 3: tech companies isn't completely solid yet. This has just kind
Speaker 3: of been some early signs that they've gotten traction on
Speaker 3: the app Store, that they're performing while on benchmarks, and
Speaker 3: sure that you know that this can be built faster
Speaker 3: and more cheaply, But I think the overall concern that
Speaker 3: we're clearly seeing, especially going into tech earnings over the
Speaker 3: next couple weeks, is question whether are the billions of
Speaker 3: dollars that are going into these models that companies have
Speaker 3: been telling investors it's worth it. We are going to
Speaker 3: monetize this and all of this investment will eventually.
Speaker 1: Be fruitful.
Speaker 3: That's coming into question, and what we're going to see
Speaker 3: over the next couple of days is wondering what is
Speaker 3: going on kind of behind the scenes, how is this
Speaker 3: being monetized?
Speaker 1: Does it have to be this expensive?
Speaker 2: Jackie? There are still a lot of unknowns here right
Speaker 2: What are you going to be watching out for over
Speaker 2: the next couple of weeks.
Speaker 3: There's so much excitement that goes into a newcomer really
Speaker 3: plowing into the space. When you have this landscape already
Speaker 3: really cemented, It's almost this like David and Goliath energy
Speaker 3: coming in and I'm going to be looking out for
Speaker 3: improvements and deep seeks apps how it uses this momentum.
Speaker 3: I'm going to be looking for any reactions from President Trump.
Speaker 3: You know, Chat Gibt didn't exist when President Trump was
Speaker 3: in office the first time, and I'm curious if this
Speaker 3: is going to inform how he goes about policy with
Speaker 3: China in other ways that could have reverberations inside the
Speaker 3: tech industry and the AI community. Those two worlds, the
Speaker 3: policy in Washington and the AI community and technology in
Speaker 3: Silicon Valley, are far more intertwined today than they ever
Speaker 3: have been.
Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.
Speaker 2: This episode was produced by Alex Tie. It was edited
Speaker 2: by Tracy Samuelson and Lynn Dwong. It was mixed and
Speaker 2: sound designed by Alex Sugia. It was fact checked by
Speaker 2: Adrian A. Tapia. Our senior producer is Naomi Shaven. Our
Speaker 2: senior editor is Elizabeth Ponso. Our executive producer is Nicole Beemster.
Speaker 2: Border Sage Bauman is Bloomberg's head of podcasts. If you
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