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From The New York Times, I'm Natalie Kitro-Eff. This is The Daily. Last week, financial markets went into a panic over an obscure Chinese tech startup called DeepSeek. That company now threatens to upend the world of artificial intelligence and the race for who will dominate it. Today, my colleague Kevin Roos, a tech columnist and the co-host of the podcast Hard Fork, on how DeepSeek caught us all off guard. It's Monday, February 3rd. Hi, Kevin. Hello.
So great to be here.
So let's jump in. Kevin, how did this giant AI tech freakout begin? Tell us that story.
So the freakout really started in earnest with a Chinese AI company called DeepSeek. And DeepSeek had released a new AI model. You know, models are released all the time. Generally, they don't make international news. But this model was different in a few ways.
DeepSeek released its new chatbot app, which is said to perform as well as ChatGPT.
One of them was that it just appeared to be a really good model, like better than the leading Chinese models at the time and on par or close to on par with the leading American models.
A new AI king was crowned today. Well, at least for now.
And so the DeepSeek app.
Unseating OpenAI's ChatGPT.
Goes to number one on the App Store charts. It vaults ahead of ChatGPT and all these better known apps.
Now, the most stunning thing here isn't necessarily that China has developed a pretty good AI app. It's how cheap it is.
And the more notable thing, the thing that really caused the American AI industry to start to panic was how cheaply this model appeared to have been built.
How cheap are we talking?
So we think that this model cost DeepSeek about $5.5 million to train. Now, that might sound like a lot of money, but it's really not compared to what many of the American AI companies are spending. Meta said that it was spending $65 billion.
$65 billion.
Microsoft says it plans to spend about $80 billion. Microsoft said it was spending $80 billion.
and some of the world's most prominent technology leaders pledging to invest an initial $100 billion.
And OpenAI had just announced this giant partnership where they were planning to spend up to half a trillion over the next four years. As much as half a trillion dollars to build the infrastructure for AI. Whoa. Yeah, it's wild. And on top of that, DeepSeek says that they built their model without access to the latest and greatest American AI chips, which up until now were thought to be necessary to build the most powerful models.
A lot of people put a lot of money into AI, and now they're wondering if that money is needed the way that some of these American companies have said it is.
And so investors start saying, wait a minute, if it only costs $5.5 million to train a leading-edge AI model, then... What the heck are all these American companies doing spending hundreds of millions of dollars or even billions of dollars to train roughly equivalent models?
Tech stocks plummeted Monday as investors raised concerns about advancements in Chinese artificial intelligence.
And so the stocks of many of the American tech companies start to fall.
Right.
And so after all of this, people in the American tech industry start asking questions like, who is DeepSeq? And how are they getting these incredible models with so little money spent on them?
Okay, we're going to get to those questions of who this company is and how they did this. But I just first want to dig into the anatomy of the market panic. What are the real fears driving this?
So it depends who you ask, because there are a couple kind of overlapping panics that are starting to happen around this time. Of course, again, there's the investor panic. I mean, imagine if you had your whole portfolio invested in American AI companies. It would be like if you just bought like a very high-end sports car, like a Lamborghini, and you had been driving it around and were so proud of how fast it could accelerate and how well it handled. And then like some random guy shows up with like a soapbox car made of balsa wood, and it can go just as fast as your car. You'd be like, what the heck?
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