Nothing gives a tech journalist more cheer than to see$ 600bn being wiped off the market cap of a tech giant in one day. And yet, that’s what happened next Monday at Nvidia, the main manufacturer of electronic shovels for the AI gold rush. The biggest one-day decline for a company in history occurred not only for the semiconductor, power, and infrastructure industries, but also for the shares of companies that were exposed to AI that had already lost more than$ 1 billion in value on the same day.
The news that a Chinese tech startup, of which some had previously heard, had released DeepSeek R1, a strong AI assistant significantly less expensive to train and operate than the US tech giants ‘ powerful models and yet was close to OpenAI’s o1 “reasoning” model was the proximate cause of this chaos. To illustrate the difference, R1 was said to have cost just$ 5.58 million to build, which is a small change compared to the billions that OpenAI and i have spent on their designs, and R1 is about 15 times more resource-efficient than anything else made by Meta.
The DeepSeek app quickly rose to the top of the Apple App Store, drawing in a large number of users who were clearly unaffected by the fact that the terms and conditions and privacy policies were in Chinese. And it undoubtedly energized the Silicon Valley population. ” DeepSeek R1″, , one of the loudest mouths in California, “is AI’s Sputnik moment”. Additionally, he described it as “one of the most amazing and impressive breakthroughs I’ve ever seen,” and as a “” as well. Donald Trump, who does not believe in giving gifts to the world, described R1 as a “wake-up call” for American tech firms.
Historical resonances were frequent. Andréessen was referring to the groundbreaking incident in 1957 when the Soviet Union launched the first Earth satellite, demonstrating technological superiority to the US, which led to the creation of Nasa and, in the end, the internet. Other people were reminded of the “personal computer” and the mockery hurled at it by the then powerhouses of the computing industry, including IBM and other manufacturers of massive mainframe computers. Suddenly, people are beginning to wonder if and its offspring will do to the trillion-dollar AI behemoths of Google, Microsoft, OpenAI et al what the PC did to IBM and its ilk. And of course, there are conspiracy theorists who wonder whether is really just a disruptive stunt designed by Xi Jinping to destroy the US tech sector. Is the training cost for the model really that low? Can we trust the figures in the technical reports its authors have released? And so on.
There are four things to take away from DeepSeek’s arrival, if you’re standing back.
Despite the widespread ( and hubristic ) western assumption that the Chinese are not as good at software as we are, the first is that China has caught up with the leading US AI labs. Even a quick examination of some of the R1 and V3 models ‘ technical details reveals incredible technical ingenuity and creativity.
Second, R1’s low training and inference costs will exacerbate American fears that the emergence of powerful, affordable Chinese AI could change the industry’s economics in a similar way that the PC’s and 1980s changed the computing industry’s landscape. What DeepSeek’s arrival indicates is that this technology will eventually become commoditized, like all other digital technology. R1 runs on my laptop without any interaction with the cloud, for example, and soon models like it will run on our phones.
Third, in spite of the vicious technology bans that the first Trump administration and Biden’s administration imposed. According to the company’s technical report, it has a cluster of 2, 048 Nvidia H800 GPUs, a technology that has been officially prohibited from being sold to China by the US government.
And last, but by no means least, R1 seems to be a genuinely open source model. It’s distributed under the permissive MIT licence, which allows anyone to use, modify, and commercialise the model without restrictions. As I write this, my hunch is that geeks across the world are already tinkering with, and adapting, R1 for their own particular needs and purposes, in the process creating applications that even the makers of the model couldn’t have envisaged. It goes without saying that this has its upsides and downsides, but it’s happening. The AI genie is now truly gone.
What I’ve been reading
When Trump meets tech
A by William Cullerne Bown of what the new regime in Washington means for the UK and Europe.
A dystopia like Philip K Dick’s
explaining why Henry Farrell thinks that our future might be like something written by the great author.
Life is more than just a technical issue.
A transcript of Ted Chiang’s fascinating interview for the LA Review of Books.