DeepSeek - How a Chinese AI Startup Shook Silicon Valley
Patrick Boyle On Finance
Patrick Boyle
4.9 • 308 Ratings
🗓️ 3 February 2025
⏱️ 32 minutes
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Summary
On Monday, over a trillion dollars was wiped off the US stock market due to the appearance of a Chinese artificial intelligence start-up DeepSeek. The release of a new reasoning model, known as R1, led investors to question US dominance in tech, their expectations around future AI capex while also raising the prospect that China might beat Silicon Valley at its own game. The new DeepSeek model can “reason” to solve complex problems and performs as well as the AI software from US tech giants like Google and OpenAI, but was apparently developed at a fraction of the price of those models. DeepSeek quickly overtook OpenAI’s ChatGPT as the most-downloaded free app on the US iOS App store. Patrick's Books: Statistics For The Trading Floor: https://amzn.to/3eerLA0 Derivatives For The Trading Floor: https://amzn.to/3cjsyPF Corporate Finance: https://amzn.to/3fn3rvC Ways To Support The Channel: Patreon: https://www.patreon.com/PatrickBoyleOnFinance Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle Visit our website: https://www.onfinance.org Follow Patrick on Twitter Here: https://bsky.app/profile/pboyle.bsky.social Business Inquiries ➡️ sponsors@onfinance.org
Transcript
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| 0:00.0 | Last week, Deepseek, a Chinese AI company, released a new reasoning model that turned out to be comparable to models made by firms like OpenA.I., Google, meta, and Anthropic. |
| 0:13.0 | The big difference is that DeepSeek claims to have built their model at a fraction of the cost big tech firms have spent. |
| 0:21.6 | A US export ban on NVIDIA's best AI chips means that DeepSeek has done what many thought was impossible, |
| 0:30.6 | building and training one of the most impressive AI models using the outdated chips available in China. |
| 0:38.6 | The new model was announced in a white paper in December and released a few weeks ago. |
| 0:44.4 | Over the weekend, people started paying a lot of attention to how good the new model was. |
| 0:50.2 | And on Monday, when the stock market opened, the NASDAQ opened down around 3.5% would |
| 0:56.7 | invidia declining by 17%. While 17% sounds like a big number, to put that in context, this was |
| 1:05.8 | a $600 billion decline in market cap, which is more than the entire market cap of ExxonMobil, |
| 1:12.9 | which not so long ago was the biggest company in the world. |
| 1:16.8 | While Nvidia and the US mega-cap tech companies got most of the news coverage, they weren't |
| 1:23.9 | the only stocks hit. The realization that a reasoning model could be built on such |
| 1:29.3 | a tight budget raised doubts about the scale of spending we've seen from Big Tech. While |
| 1:35.1 | Big Tech suddenly seemed less insulated from competition than they were previously believed to be, |
| 1:41.4 | their price declines on Monday were quite modest. |
| 1:44.7 | The hardest hit stocks, other than NVIDIA, were the ones expected to benefit most from |
| 1:50.1 | the emerging data center economy. |
| 1:53.4 | Utilities like Constellation Energy, who announced a few months ago that they were reopening |
| 1:58.6 | Three Mile Island to power Microsoft data centers, along with |
| 2:03.1 | other electrical utilities near data center hotspots, all fell hard. |
| 2:09.2 | Just a few days earlier, the Stargate project had been announced with huge fanfare, |
| 2:15.0 | where plans for up to 20 large AI data centres were announced in the United |
... |
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