Lots of questions are still swirling this morning about the implications of DeepSeek, the Chinese start-up whose A.I. tools drove yesterday’s stock market plunge. Is it really as good as the closed-source frontier models made by OpenAI and Google? Did DeepSeek really use fewer chips? Did it piggyback off the work of U.S. players? And if it’s as good as some have suggested, how will its rise scramble the software, hardware and energy sectors? We break down what we know — and still don’t know — in our report below.
Plus, DealBook’s Lauren Hirsch has a scoop on Mark Zuckerberg’s continuing political evolution.
The $600 billion hit
Stock futures are looking up after Monday’s markets blood bath, as investors take stock of what the Chinese start-up DeepSeek really means for the artificial intelligence business.
The emerging consensus is that DeepSeek — which appears to have built a credible rival to the best-funded American tech giants with a fraction of their resources — has upended the race for A.I. supremacy. Apple and Meta might end up being better positioned than initially thought, while Nvidia might not be in a disastrous position.
A.I. laggards might not be as behind as previously believed. Just look at who in the so-called Magnificent Seven group of tech giants was up on Monday. What gives?
The emergence of lower-cost, readily available A.I. models might mean that spending tens of billions of dollars to develop such tools might be the wrong strategy. Apple had been criticized for not going all out to plow its riches into developing its own A.I. And Meta has been questioned about how its models have failed to become as popular as OpenAI’s and Google’s have.
Satya Nadella of Microsoft suggested on Monday that DeepSeek meant that the cost of using A.I. was going down, enabling its more widespread use. For Apple and Meta, which are ultimately going to be users of the technology, that’s a good thing.
Nvidia’s future is cloudier. The company lost nearly $600 billion in market value on Monday, as investors weighed whether the DeepSeek model showed that companies don’t necessarily need hugely expensive caches of its chips to train A.I. programs.
Chatbots and other such programs still require tons of processing power, which is good news for Nvidia. But the company’s ability to command super-high prices for its chips is no longer a given.
What about OpenAI? The company behind ChatGPT has raised astronomical sums from investors betting that it will continue its market lead.
Sam Altman, its C.E.O., was magnanimous in assessing DeepSeek, calling its R1 offering “an impressive model, particularly around what they’re able to deliver for the price.” That said, he added that OpenAI would “obviously deliver much better models,” and that having more computing power — like what its Stargate initiative is meant to provide — would still be important.
But Josh Kushner of Thrive Capital, which led OpenAI’s $6.6 billion fund-raising round last year, had a more pointed take on social media:
“pro america” technologists openly supporting a chinese model that was trained off of leading US frontier models, with chips that likely violate export controls, and – according to their own terms of service – take US customer data back to china
HERE’S WHAT’S HAPPENING
The Trump administration pushes a plan for universal tariffs. Scott Bessent, who was confirmed onn Monday as Treasury secretary, supports imposing levies starting at 2.5 percent and raising them over time, giving countries time to negotiate, The Financial Times reports. But President Trump said he would like to see “much bigger” across-the-board tariffs, and suggested that cars from Canada and Mexico topped his list of targets. Tariff concerns have weighed heavily on the markets; the dollar rose on the news.
Whole Foods workers in Philadelphia vote to unionize. The store where they work would be the grocer’s first unionized shop, and the organizers hope to inspire similar moves at other locations of the Amazon-owned grocery chain. Amazon has been fighting off labor organization efforts at its warehouses and among its drivers for years. Whole Foods has five days to challenge the outcome.
Trump says Microsoft has entered the fray to buy TikTok. Asked by reporters whether the Windows maker was involved in talks to take control of the video platform from its Chinese parent, the president said, “I would say yes. A lot of interest in TikTok.” Trump openly said he was hoping for a bidding war for TikTok, but Microsoft — which tried and failed to strike a deal in 2020 — declined to comment on his remarks.
DeepSeek, explained
DeepSeek has sent a jolt through Silicon Valley, Wall Street and the White House. President Trump — who a week ago hailed a separate alliance between OpenAI, SoftBank and Oracle to bankroll the $100 billion Stargate artificial intelligence initiative — called the Chinese chatbot maker “a wake-up call” for Big Tech.
But is it, really? The Times’s Cade Metz, who answered some pressing questions about DeepSeek, explained to DealBook why the start-up’s stunning rise is such a big deal.
How does DeepSeek stack up against OpenAI and Google? It’s as effective at answering questions, solving logic problems or writing code as anything on the market. More impressive, it released an advanced “reasoning” model called DeepSeek-R1 that represents the next phase in A.I. development.
Even OpenAI’s latest reasoning model, OpenAI o3, hasn’t been released to the public.
Does this mean that China is now ahead of the United States in the race to dominate A.I.? Not yet. The world has yet to see OpenAI’s o3 model, and its performance on standard benchmark tests is more impressive than anything else on the market.
Why is open-source A.I. a big deal? DeepSeek has shared its underlying computer code with other businesses and researchers, allowing others to build and distribute their own products. It’s a way to stress-test and improve upon code, which is partly why DeepSeek and others in China have been able to build competitive A.I. systems so quickly and inexpensively. When Meta freely shared an A.I. system in 2023, some considered it dangerous because bad actors could use it. DeepSeek has helped show that this system can create winners.
Yann LeCun, Meta’s chief A.I. scientist, said the stock market slide fundamentally misunderstands the investment case around the technology, especially for high-end chips. What does he mean? Chips are needed in two stages: training (or building) the A.I., and in running the A.I. Running is when you and I actually use the service — what’s called “inference.”
Yann is saying that lots of chips are still needed to run A.I. products.
Some think that DeepSeek is using more Nvidia chips than it has claimed, and that costs are far higher. Can we trust what it has said? DeepSeek detailed in a research paper how it was able to more efficiently use a small number of chips. Anyone else can duplicate what it did. DeepSeek may have access to more Nvidia chips, and it certainly incurred costs beyond the roughly $6 million it said was needed to train its new systems. But its efficiency gains are real.
Mark Zuckerberg’s latest power move
Mark Zuckerberg’s ambitions as a Washington power player have led him to a previously unreported corner of the capital’s hobnobbing scene: the Business Roundtable.
The Meta C.E.O. quietly joined the organization in September, after reaching out about doing so months earlier, Andy Stone, a spokesman for Meta, confirmed to DealBook’s Lauren Hirsch.
It was a remarkable move for Zuckerberg, who for years avoided Washington and once shunned the establishment.
Lately, he has embraced President Trump’s return to office. He has begun speaking out on issues dear to conservatives. The billionaire has also criticized what he considered moves to police speech, and lamented to the podcaster Joe Rogan that “a lot of the corporate world is pretty culturally neutered.”
Zuckerberg has become more visible in Washington under Trump — he landed prime seating for the inauguration and attended Peter Thiel’s blowout bash in the district. About two weeks before Trump was sworn into office, Zuckerberg announced that the tech giant would stop working with third-party fact checkers, a move that appeared intended to satisfy Trump and conservatives who have accused the company of censoring them. “I have a much greater command now of what I think the policy should be,” the Meta C.E.O. told Rogan, “and this is how it’s going to be going forward.”
The Business Roundtable had been a symbol for the gentle capitalism that Zuckerberg has railed against. In 2019, the group, then led by JPMorgan Chase’s Jamie Dimon, issued a statement arguing that companies should go beyond advancing the interests of shareholders, and invest in employees, protect the environment and deal fairly and ethically with suppliers.
But such goals had been falling out of favor even before Trump was re-elected. Corporate America has resolutely refocused itself on the bottom line. Walmart’s Doug McMillon, who was the Business Roundtable chairman after Dimon, rolled back the company’s diversity, equity and inclusion efforts in November amid a broader political and cultural backlash. At this year’s World Economic Forum in Davos, Switzerland — where diversity initiatives were once celebrated — discussion of many social issues was nearly absent.
“Diversity in general is good for business,” Chuck Robbins, the current chair of the Business Roundtable, told Andrew at Davos. “But I think the pendulum swung.”
Gates vs. Musk on populism
There’s little love lost between Bill Gates and Elon Musk.
The outspoken tech titans have clashed over the years on Covid-19 vaccines, artificial intelligence and Twitter (now X) as a font of misinformation. (The revelation that Gates had shorted Tesla’s stock really got under Musk’s skin.)
Gates has fired a new round. In an interview with The Times of London, the Microsoft co-founder accused Musk of using his money and social media platform to “destabilize the political situations in countries.” Musk has increasingly inserted himself into European politics, trolling elected leaders and embracing deeply contentious figures and hard-right political parties in Britain and Germany.
Alice Thomson of The Times of London writes:
He’s particularly riled by Musk’s put-downs of democratically elected leaders and his discovery of the hard right. “You want to promote the right wing but say Nigel Farage is not right-wing enough … I mean, this is insane.”
“If someone is supersmart, and he is, they should think how they can help out,” Gates added. “But this is populist stirring.”
The Microsoft co-founder added that he believed democracies needed to be on guard:
“Other countries maybe should adopt safeguards to make sure superrich foreigners aren’t distorting their elections. It’s difficult to understand why someone who has a car factory in both China and in Germany, whose rocket business is ultra-dependent on relationships with sovereign nations and who is busy cutting $2 trillion in U.S. government expenses and running five companies, is obsessing about this grooming story in the U.K. I’m like, what?”
THE SPEED READ
Deals
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Smithfield Foods, the world’s biggest pork producer, raised $522 million in its I.P.O., below expectations; it is set to begin trading on the Nasdaq on Tuesday. (Bloomberg)
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Reid Hoffman, the venture capitalist and LinkedIn co-founder, raised $24.6 million for a new cancer research start-up that uses A.I. to discover promising drugs. (WSJ)
Politics and policy
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