AI Shakeup: DeepSeek Raises Concerns and Questions

Earnings Calls Reveal Tech Giants' AI Strategies

Recent developments surrounding DeepSeek, a Chinese AI company, have sparked concerns and raised questions about the AI infrastructure investments of tech behemoths Microsoft (MSFT) and Meta (META).

DeepSeek's Impact

DeepSeek's announcement of training an AI model for just $5 million has raised alarm bells on Wall Street. Investors are questioning the necessity of massive spending on AI infrastructure by US tech companies, especially given DeepSeek's claims of using less expensive chips.

Microsoft and Meta's Response

During their earnings calls on Wednesday night, Microsoft CEO Satya Nadella and Meta CEO Mark Zuckerberg addressed DeepSeek's implications. Nadella acknowledged DeepSeek's advancements but emphasized that AI optimization would ultimately benefit Microsoft's hyperscaler and platform provider status.

Zuckerberg downplayed DeepSeek's threat, stating that the industry is continuously evolving and that DeepSeek's announcement represents the ebb and flow of technology development. Meta plans to invest further in data centers, expecting the demand for AI models capable of providing accurate answers based on available computing power.

Analyst Perspectives

Analysts have questioned DeepSeek's claims, citing the exclusion of research and experiment costs from the $5 million figure. Others have criticized the use of distillation, an AI training technique that involves "teaching" models using questions and answers provided by a larger model.

Investment Strategies

Despite DeepSeek's claims, Zuckerberg believes it's premature to reduce AI infrastructure investments. Meta plans to allocate $65 billion in AI infrastructure this year, while Microsoft is earmarking $80 billion by fiscal 2025.

Outlook for Big Tech

Meta and Microsoft's earnings calls provide insights into the AI strategies of major tech companies. Apple (AAPL), Intel (INTC), Google (GOOG), and Amazon (AMZN) are expected to comment on the AI landscape during their upcoming earnings announcements.