Dado Ruvic | Reuters
Microsoft CEO Satya Nadella commented on its “real innovations.” OpenAI’s Sam Altman described it as “clearly a great model.” Apple
The tech CEOs were all talking about China’s DeepSeek, which burst out of obscurity and into the center of the tech universe this week. In the past few days, those execs and many of their peers have addressed questions about the startup lab’s new artificial intelligence model, which has stunned experts and was reportedly much more cost effective to create than competitive models in the U.S.
DeepSeek’s mobile app shot up to the top of the charts on Apple’s App Store early in the week and remained in the lead spot as of Friday, ahead of OpenAI’s ChatGPT. Reports that its new R1 model, which rivals OpenAI’s o1, cost just $6 million to create sent shares of chipmakers Nvidia and Broadcom down 17% on Monday, wiping out a combined $800 billion in market cap.
The timing was stark. DeepSeek’s rollout landed just as tech earnings season was about to begin, with Meta, Microsoft, Tesla and Apple all reporting between Wednesday and Thursday, and a week into President Donald Trump’s second term in office. Trump has emphasized the importance of the U.S. winning in AI, particularly against China, and in his first week back in the White House announced a project called Stargate that calls on OpenAI, Oracle and SoftBank to invest billions dollars to boost domestic AI infrastructure.
There’s been plenty of debate online about the significance of DeepSeek’s rollout and whether the financial achievement is real. A new report from research firm SemiAnalysis estimated DeepSeek’s costs at “well higher than $500M over the company history.”
But it was an inescapable topic this week across the industry. AI is every company’s focus right now, particularly in technology, where industry leaders are spending tens of billions of dollars building out data centers and buying advanced chips to develop more powerful models. For leaders of U.S. tech companies, the unifying aspect is the need to beat chief adversary China in the defining technology of the future.
“Technology is not inherently good,” and could pose threats in the wrong hands, Karp, the CEO of Palantir, told CNBC’s Sara Eisen in an interview that aired Friday. “We have to acknowledge that, but that also just means we have to run harder, run faster, have an all-country effort.”
Cook was asked by an analyst on Apple’s earnings call if the DeepSeek developments had changed his views on the company’s margins and the potential for computing costs to come down. Cook, whose company had just reported a record gross margin, offered a vague response.
“In general, I think innovation that drives efficiency is a good thing,” he said. “And, you know, that’s what you see in that model. Our tight integration of silicon and software, I think, will continue to serve us very well.”
A day earlier, Meta CEO Mark Zuckerberg suggested that the overall situation is nuanced and that early reports and results from a single model don’t fundamentally change the equation. Meta said last week that it would invest between $60 billion and $65 billion in 2025 to expand its computing infrastructure related to artificial intelligence.
“It’s probably too early to really have a strong opinion on what this means for the trajectory around infrastructure and capex,” Zuckerberg said about DeepSeek, on his company’s fourth-quarter earnings call. “There are a bunch of trends that are happening here all at once.”
‘Bending the curve’
On Microsoft’s call, Nadella said in his introductory remarks that people who want to run DeepSeek R1 will “soon be able to” on the company’s Copilot+ PCs and on graphics processing units (GPUs) on Windows.
Later on the call, Nadella was asked by an analyst if we’re “seeing AI scale now at lower cost.”
“What’s happening with AI is no different than what was happening with the regular compute cycle,” Nadella responded, adding that “it’s always about bending the curve and then putting more points up the curve.”
He said DeepSeek is showing some “real innovations,” and that OpenAI, which Microsoft backs, is seeing similar improvements. Ultimately, he said, “it all gets commoditized,” with customers as the major beneficiaries.
LinkedIn co-founder Reid Hoffman, an early investor in OpenAI and a Microsoft board member who also co-founded Inflection AI, told CNBC that this is no time to panic. Hoffman unveiled his latest AI startup this week, called Manas AI, backed by almost $25 million, with a mission to try and accelerate the drug discovery process.
Hoffman said that while DeepSeek might encourage American companies to pick up the pace and share their plans sooner, the new revelations don’t suggest that large models are a bad investment.
“The competition game is on,” he said. “But I don’t think it’s the ‘Oh my God, we’re losing!’ as American technology.”
OpenAI is perhaps the most direct competitor, and CEO Altman called R1 “clearly a great model” at an event in Washington, D.C., on Thursday. He also echoed sentiment expressed by President Trump, who said that DeepSeek should be a “wake-up call” to U.S. tech.
“This is a reminder of the level of competition and the need for democratic AI to win,” Altman said. “This is a strong model and I think it’s a reminder also of the level of interest in reasoning, the level of interest in open source.”
Earlier in the week, Altman took to X to assert OpenAI’s intentions to keep pushing forward.
“We will obviously deliver much better models,” he wrote in a post on Jan. 27. “And also it’s legit invigorating to have a new competitor!”
— CNBCs Jordan Novet, Hayden Field, Kif Leswing, Ashley Capoot and Jonathan Vanian contributed to this report.
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