Unless you have been living under a rock, you would have heard about DeepSeek, the Chinese AI model.
Simply said, DeepSeek has caused the AI sector to question its beliefs.
Amid the uncertainty, we can be sure of one thing.
There’s no shortage of opinions on DeepSeek’s impact and its implications for Nvidia (NASDAQ: NVDA), and other chipmakers, such as Broadcom (NASDAQ: AVGO), Taiwan Semiconductor Manufacturing Co. (NYSE: TSM), and Micron Technology (NASDAQ: MU).
But here’s the thing: while everyone is speculating about what will happen next, how are the key players reacting?
Let’s take a look.
Open-sourcing AI models
Starting with Meta Platforms (NASDAQ: META), co-founder and CEO Mark Zuckerberg has been vocal in his support for open-sourced AI models.
Therefore, it should come as no surprise that he is open to adopting the new techniques, even when it comes from a competitor.
During its latest earnings briefing, Zuckerberg said [bolded for emphasis]:
“I think there [are] a number of novel things that they did that I think we’re still digesting. And there are a number of things that they have advanced that we will hope to implement in our systems.
And that’s part of the nature of how [open source] works, whether it’s a Chinese competitor or not.
I kind of expect that every new company that has an advance — that has a launch is going to have some new advances that the rest of the field learns from.”
On the other hand, OpenAI, which runs a proprietary AI model, was more reserved on DeepSeek’s impact.
During a Reddit AMA, CEO Sam Altman offered his take on taking a different open-source approach:
“I personally think we have been on the wrong side of history here and need to figure out a different open source strategy; not everyone at OpenAI shares this view, and it’s also not our current highest priority.”
Will AI models be commoditised?
Interestingly, Microsoft (NASDAQ: MSFT), one of OpenAI’s key partners, believes that AI models will be commoditised.
CEO Satya Nadella said:
“I think DeepSeek has had some real innovations.
… now that all [AI models] gets commoditised, and it’s going to get broadly used.
So that type of optimizations means AI will be much more ubiquitous. And so therefore, for a hyperscaler like us, a PC platform provider like us, this is all good news as far as I’m concerned.”
Clearly, Microsoft will not be relying on OpenAI for success in the AI arena, as it has the resources to pursue on multiple avenues.
Nadella’s view is echoed by ServiceNow (NYSE: NOW).
ServiceNow CEO Bill McDermott welcomed the arrival of DeepSeek, arguing that competitive differentiation will shift to applications where the company is better positioned:
“It’s actually a fantastic news for ServiceNow because as these models are being commoditized at a rapid rate and probably more rapid than anyone could have dreamed of.
It’s super, super exciting for platform and app vendors like us since the competitive differentiation will happen at our level in terms of the applications, the business processes, how you can help these companies run better and then ultimately get a business outcome.”
Of course, as investors, we should recognise that companies such as ServiceNow will benefit from a commoditised AI model.
If the cost of serving customers decreases, then ServiceNow retains a larger share of the profits.
Get Smart: It’s still early in the game
Here’s something everyone should remember: ChatGPT is barely two years old.
Calling the winners and losers this early in the game is premature. So, let’s not kid ourselves: we do not know how the main players will respond and how the sector will evolve as a result.
Nobody does. The future remains unknown.
To paraphrase Satya Nadella, let’s be investors who seek to “learn-it-all” rather than to act as though we “know-it-all”.
If history has taught us anything, it’s best to stay humble and learn as the industry evolves.
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Disclosure: Chin Hui Leong owns shares of Meta Platforms, Microsoft and ServiceNow.
