Tech stocks tank as US AI dominance no longer a sure bet
- Reference: 1737987549
- News link: https://www.theregister.co.uk/2025/01/27/tech_stocks_tank_as_us/
- Source link:
As The Register revealed at the [1]weekend , DeepSeek launched some openly available machine-learning models which perform favorably against US competitors OpenAI and Meta, according to benchmarks. And what's really set the cat amongst the investors is that they were trained using fewer Nvidia chips, or so DeepSeek claims.
China's DeepSeek just dropped a free challenger to OpenAI's o1 – here's how to use it on your PC [2]READ MORE
DeepSeek, founded in 2023, by Liang Wenfeng and financially supported by his quantitive hedge fund High Flyer, released DeepSeek V3 at the close of 2024, and has now rolled out R1, classified as a reasoning model optimized from V3.
This led investors to question the viability of spending tens of billions of dollars on AI training, especially when the returns on investment still seem uncertain. This existential crisis hit stock valuations, with Nvidia down by as much as 14 percent in pre-market trading today, Microsoft falling 7 percent, and Meta down 5 percent.
The Nasdaq 100 futures was down 3.51 percent at the time of writing amid the searching questions that DeepSeek is seemingly posing.
[3]
"Deepseek R1 is AI's Sputnik moment," [4]said Marc Andreessen , partner in venture capitalist Andreessen Horowitz, which raised billions last year to spend on AI startups. As Reg readers no doubt know, this effectively indicates that something has to change so US big tech can compete without spending so much.
[5]
[6]
Microsoft, AWS, Google and others are ploughing billions into AI in the expectation that those bets come off. Meta said last week it is spending $60 billion on AI and there is also the [7]Stargate initiative that is betting a collective $500 billion.
As of September last year, the hyperscalers had spent $200 billion in capital expenditure since the start of 2023, and yet [8]AI licenses were around a tenth of that. The bubble was expanding and expanding.
[9]
Former Microsoft exec [10]Steven Sinofsky said on X :
"The current trajectory of AI if you read the news in the US is one of MASSIVE CapEx piled on top of even more MASSIVE CapEx. It is a race between Google, Meta, OpenAI/Microsoft, xAI, and to a lesser extent a few other super well-funded startups like Perplexity and Anthropic.
"The past 5 years of AI have been bigger models, more data, more compute, and so on. Why? Because, I would argue, the innovation was driven by the cloud hyperscale companies and they were destined to take the approach of doing more of what they already did. They viewed data for training and huge models as their way of winning and their unique architectural approach."
[11]
The "big scale solutions" are "consuming too much capital," he added on X. He reckons that beyond this, the current path is not sustainable.
"It is a path that works against the history of computing, which is that resources needed become free, not more expensive. The market for computing simply doesn't accept solutions that cost more, especially consumption based pricing. We've seen Microsoft and Google do a bit of resetting with respect to pricing in the hopes of turning these massive CapEx efforts into direct revenue."
[12]Where does Microsoft's NPU obsession leave Nvidia's AI PC ambitions?
[13]OpenAI's ChatGPT crawler can be tricked into DDoSing sites, answering your queries
[14]Just as your LLM once again goes off the rails, Cisco, Nvidia are at the door smiling
[15]AI can improve on code it writes, but you have to know how to ask
The arrival of DeepSeek - which has built a scale out tool that is claimed to have been trained on 14.8 trillion tokens using 2,048 Nvidia H800s, amassing 2.788 million GPU hours, costing circa $5.58 million - has been impactful in the financial world over the past few hours.
"It seems as if there is a bit of reality dawning that China has not been sitting idle, even as these tariffs and investment restrictions on tech companies have been put in place," said Mitul Kotecha, Asia head of emerging markets macro and foreign exchange strategy at Barclays, as quoted by the [16]Financial Times . ®
Get our [17]Tech Resources
[1] https://www.theregister.com/2025/01/26/deepseek_r1_ai_cot/
[2] https://www.theregister.com/2025/01/26/deepseek_r1_ai_cot/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Z5e7t4V9VxBt4bCF0GpxaAAAAIA&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://x.com/pmarca/status/1883640142591853011
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z5e7t4V9VxBt4bCF0GpxaAAAAIA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z5e7t4V9VxBt4bCF0GpxaAAAAIA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2025/01/24/meta_ai_spending/
[8] https://www.theregister.com/2024/11/07/it_spend_europe_2025/
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Z5e7t4V9VxBt4bCF0GpxaAAAAIA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[10] https://x.com/stevesi/status/1883746880536072375
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Z5e7t4V9VxBt4bCF0GpxaAAAAIA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[12] https://www.theregister.com/2025/01/20/microsoft_nvidia_ai_pcs/
[13] https://www.theregister.com/2025/01/19/openais_chatgpt_crawler_vulnerability/
[14] https://www.theregister.com/2025/01/17/nvidia_cisco_ai_guardrails_security/
[15] https://www.theregister.com/2025/01/07/ai_can_write_improved_code_research/
[16] https://www.ft.com/content/e670a4ea-05ad-4419-b72a-7727e8a6d471
[17] https://whitepapers.theregister.com/
Re: Won't somebody think of the CEOs?
Altman has a 10 percent holding in reddit. There is a reason it's not behind a wall (yet), and occasionally goes suspicious (I want to pull my hair when I see a front page topic pushed with every comment having 1 like lol).
Our illustrious "conservative" government leaders have assured us we are the world's leader in memecoins. Why fret???
Spare a thought for our dear 'socialist' Rachel Reeves who will now have to scour the UK in search of more airports that can accommodate additional runways.
Weird how you can't simply announce 'growth' and have it happen.
any body remember C&W pumping $500mil into virtual desktops.
I can, that hype train crashed hard, why do you never hear the name C&W anymore.
Pumping billions into garbage that does fuck all is pretty wasteful
"why do you never hear the name C&W any more"
Well that was a bit of a rabbit hole trip to Wikipedia. A whole load of manglements devoting their time to buying and selling each other instead of looking after business.
They've still got a long way to fall. But give them a little time...
It can't pop soon enough.
[1]‘Serious concerns’ about DWP’s use of AI to read correspondence from benefit claimants
The DWP apparently thinks it can shovel everything into the magic AI machine and it'll do everything for them:
That is the challenge facing the Department for Work and Pensions (DWP) as correspondence floods in from benefit applicants and claimants – of which there are more than 20 million, including pensioners, in the UK. The DWP thinks it may have found a solution in using artificial intelligence to read it all first – including handwritten missives.
Human reading used to take weeks and could leave the most vulnerable people waiting for too long for help. But “white mail” is an AI that can do the same work in a day and supposedly prioritise the most vulnerable cases for officials to get to first.
By implication, it deprioritises other people, so its accuracy and how it reaches its judgments count, but both matters remain opaque. Despite a ministerial mandate, it is one of numerous public sector algorithms yet to be logged on the transparency register for central government AIs.
[..]
An internal data protection impact assessment said letter writers “do not need to know about their involvement in the initiative”.
The assessment says correspondence can include national insurance numbers, dates of birth, addresses, telephone details, email addresses, details of benefit claims, health information, bank account details, racial and sexual characteristics, and details on children such as their dates of birth and any special needs.
People who work with benefit claimants are now voicing “serious concerns” about how the system handles sensitive personal data.
[1] https://www.theguardian.com/society/2025/jan/27/dwp-ai-whitemail-benefit-claimants-applicants
Pop!
pop!
You can almost hear the bubble bursting.
As I said, there is no business case for spending zillions on this.
Trump might ban the Chinese version or stick 10,000% tariffs on it, but there is another way and all those promised vast investments just vanished.
If you buried a tonne of cash in AI, let's hope you learned from the Metaverse and the small print included a few lines about clawing it back if you changed your mind.
Re: You can almost hear the bubble bursting.
"clawing it back if you changed your mind"
No chance. Once it's gone it's gone. You might get a discounted deal for data centre capacity.
Re: You can almost hear the bubble bursting.
10000% tariffs wouldn't be a problem - it's free to download and MIT licensed. I suspect it's been downloaded at least a million times by now, and people will spend a week or so struggling with getting Docker to work and installing and running it, then another week playing with it until they get bored. Then it will be available on umpteen websites for the public to do the same with, and then even more people will conclude that it's been overhyped, which will cause share prices to fall even further.
Re: You can almost hear the bubble bursting.
Any business case that might have existed before 20th Jan 2025 MUST be rewritten if not tossed into the garbage. Since the advent of Trump 2.0, his memecoin (and that of Melania) has tanked. The world economy is preparing for his tariff wars and the inevitable recession that might lead to depression.
With a deep recession ALL spending will be cut back including AI.
Perhaps it it time to cancel those exotic holidays?
Re: You can almost hear the bubble bursting.
>Since the advent of Trump 2.0, his memecoin (and that of Melania) has tanked.
I'm sorry, you seem to have mis-spelt personal untraceable international bribery fund as "memecoin"
We discussed this before
Banning China from using US technology will only ensure China develops their own and will ban the US & al. from using it.
They do really smart stuff in East and South Asia. The fact that much of the smart work in US universities and US tech is done by people who were educated in East Asia should have been a warning sign.
Wishful ThinkingTM is not a good basis for policy.
Re: Wishful ThinkingTM is not a good basis for policy
No, but apparently it's the only policy in use these days.
No Path to Profitability except handwavey
Microsoft, for example, dumping in tens of billions and then lying out their ass about how much money they're making on it by counting anyone who has Copilot or Recall installed as 'AI revenue'.
The only thing that will possibly make back the money they poured into the 'AI' toilet is AGI, and good luck with that, you won't get it with LLMs. And if you suddenly had AGI, now you've got a whole new set of existential crises, but as usual they think they'll be the ones fully in control, what could go wrong?
Re: No Path to Profitability except handwavey
I suspect the thinking about AI is that AI will replace human employees. In this case, the supplier who controls the AI can cream off the profits from firing those employees.
That has been MS' business model with Windows & Office. Quite natural that they expect to repeat this with AI.
But this only works when you are a monopolist. The US has all the, IP based, legal Infrastructure to enforce a US monopoly. The tariff insanity has been installed because the "foreigners" are starting to win the IP game in technology.
Becoming a global monopolist in AI has become much harder with the arrival of a credible non-American competitor.
Indeed, Pop! is likely.
Suck it, Drumpf! *LOL*
Won't somebody think of the CEOs?
Sam Altman rolling around on his mattress stuffed with specially printed million-dollar bills, the only thing he can sleep on, screaming like a toddler who has just been given the wrong kind of biscuit.