DeepSeek Reshapes AI Development, Raising Questions About Investment

DeepSeek, a Chinese AI company, has revolutionized the AI development landscape, according to Snowflake CEO Sridhar Ramaswamy. The company's data storage technology supports the development of large language models like DeepSeek and ChatGPT.

Ramaswamy highlights two key implications:

* Continued Innovation Potential: DeepSeek demonstrates that many companies can aspire to train AI models, fostering innovation.
* Questionable Investment Model: It raises concerns about whether billions of dollars are necessary for world-class AI training.

DeepSeek's Cost Advantage

DeepSeek's RI model reportedly costs $5.6 million to build, significantly lower than US-based companies like OpenAI and Anthropic. This has raised concerns about overspending on AI infrastructure, particularly on Nvidia chips.

Market Reaction

Following DeepSeek's announcement, Nvidia's stock suffered a record $588.8 billion loss, while the AI sector experienced a general sell-off. This has persisted into Wednesday, with Nvidia shares down 4.5%.

Morgan Stanley Outlook

Morgan Stanley analyst Brian Nowak suggests that the DeepSeek model may reduce the cost of AI development, leading to faster innovation. However, he remains bullish on Microsoft despite its OpenAI investment.

Impact on Apple

Nowak believes Apple could benefit from investor concerns about DeepSeek's impact on "Magnificent Seven" tech companies. Apple's focus is on smaller, device-specific AI models, which may reduce its financial risk compared to hyperscale AI developers.

China's AI Threat

Ramaswamy warns that investors should be vigilant about developments from DeepSeek's Chinese rivals. "Even the fact that they were able to do this coming out of nowhere is a wake-up call again," he said.