Today (Jan 27 2025) is a historical day for the AI-related stocks. NVADIA dropped 17% in one day. Broadcom dropped also dropped 17%, Google 4.2%, Microsoft 2.1%.
All because of a Chinese AI startup called DeepSeek.
We will know more as time goes on, but my initial reaction is skeptism.
From what I know about AI model training, there does not seem to be much room for shortcuts. The fundamental research behind a more efficient ML algorithm is hard and is incremental at this point. So to hear that DeepSeek was able to train its AI model with significantly less data and lower cost certainly makes me want to know more – How did they do it?
Of course, we should never underestimate the technical prowess of our Chinese competitors. I may be the one to be laughed at in the end. But there are just too much ambiguities at this point. A lot will depend on how much information DeepSeek will share in time. But Chinese companies are known to be evasive, and on more than a few occasions, not truth-telling – Luckin coffee, anyone?
I hope to be able to learn some valuable lessons out of this. For one, I would like to be a better investor, so would like to see how good my judgement is. Secondly, I will learn more about the cost of AI businesses. Lastly, this will be a good test to understand the Chinese business scenes.
Time will tell.