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Hundreds of tech insiders subscribe to Big Technology’s premium tier for more reporting and to support our independent journalism. Please consider subscribing for just $8 per month. Money, Drama, and China: Why AI’s Next Step Could Be MessyDeepSeek’s open source, efficient AI model puts the billions spent to build similar technology in question.
Two headlines this week almost perfectly captured the weird moment the AI field is barreling toward. First, news broke that OpenAI, Oracle, Softbank, and others plan to invest $500 billion in AI infrastructure via a new, Trump-blessed initiative called Stargate. And then, Chinese startup DeepSeek released r1, an inexpensive, open source, and capable reasoning model. DeepSeek r1 currently sits in a tie for third place on ChatBot Arena, a ranking of the best large language models, ahead of OpenAI’s o1-preview, xAI’s Grok, and anything Anthropic’s ever built. Its ascent defines a moment where efficient, cheaper models are starting to rival those trained with billions of dollars. And now, it’s becoming impossible not to question whether all that spending is worthwhile if a few million dollars can do a good enough job. “If the training costs for the new DeepSeek models are even close to correct, it feels like Stargate might be getting ready to fight the last war. Like bringing an M1 Abrams MBT to a drone fight,” venture capitalist Jeremy Liew said on X early on Friday. The DeepSeek story, covered by the New York Timesand others this week, is one of the more fascinating AI developments in recent memory. A Chinese quantitative stock trading company built the AI startup after using its profits to purchase thousands of NVIDIA chips in the early 2020s. Now, its technology is rivaling top western models, even with the constraints on chips it can use due to trade policy limitations. The Times story also mentioned another new model, Sky-T1, that a Berkeley professor and his students built on top of Alibaba open source technology that reportedly rivals OpenAI’s o1 model on some benchmarks. To be sure, there’s some rumbling that DeepSeek’s results may not be all they seem to be. Google DeepMind CEO Demis Hassabis told me in an interview conducted last week that the company may have relied on western systems, or used other open source models as a starting point. Others have suggested the company has more NVIDIA chips than it lets on. So the story will continue to evolve. Still, Hassabis acknowledged DeepSeek’s work is impressive and “China is very, very capable at engineering and scaling.” Judging by Silicon Valley’s early reaction to DeepSeek r1, the technology seems real enough. Venture capitalist Marc Andreessen of called it “one of the most amazing and impressive breakthroughs I’ve ever seen — and as open source, a profound gift to the world.” And his Andreessen Horowitz colleague Anjney Midha said “from Stanford to MIT, Deepseek r1 has become the model of choice for America’s top university researchers basically overnight.” In a since-deleted tweet, Perplexity CEO Aravind Srinivas strongly praised the DeepSeek model. “More the narrative that China are copycats, more we shoot ourselves in the foot,” he said. “Deepseek is two orders of magnitude more efficient with capital allocation than OpenAI.” Srinivas did not reply to a request for comment. If DeepSeek is indeed as capable as many are claiming, there will be some serious questions about whether the billions of dollars companies like OpenAI, Anthropic, and xAI spent to get to this point were worthwhile. Jim Fan, a senior research manager at NVIDIA, said on X that DeepSeek’s emergence is “a humbling wake-up call to us all that open science has no boundary.” Addressing the financial investment, Fan said the existing compute infrastructure should produce even more powerful results with DeepSeek’s development. “We shall get 10x more powerful AI with the compute we have today and are building tomorrow. Simple math! The AI timeline just got compressed.” Fan’s view is the most optimistic scenario though, especially if limitations like a potential data wall hinders generative AI’s progress. Ultimately, if companies can replicate what you do for billions of dollars using a few million, that suggests money inefficiently spent, as Srinivas points out. Still, in pursuit of AGI, today’s leading research houses will push forward with even bigger and more expensive data centers, projects that were already drama laden without the DeepSeek variable. To get Stargate off the ground, OpenAI had to adjust its deal with Microsoft and then spent the week fighting with Elon Musk. Soon, we’ll see if it’s worth it, or if the DeepSeeks of the world take over. As VC Sam Lessin put it earlier this week, most inventors believe OpenAI is either going to zero or infinity. That’s perhaps never felt more true than this week. Compliance for Startups: Download the SOC 2 Checklist (sponsor)As a startup founder, finding product-market fit is your top priority. But landing bigger customers requires SOC 2 or ISO 27001 compliance—a time-consuming process that pulls you away from building and shipping. That’s where Vanta comes in. Join over 9,000 companies, including hundreds of Y Combinator-backed startups like Supabase, Newfront, and Fern who streamline compliance with Vanta’s automation and trusted network of security experts. Start with the SOC 2 compliance checklist, which breaks down the process into clear steps—so you can spend less time on compliance and more time growing your business. Advertise on Big Technology? Reach 150,000+ plugged-in tech readers with your company’s latest campaign, product, or thought leadership. To learn more, write [email protected] or reply to this email. What Else I’m Reading, Etc.Trump revokes Biden’s AI executive order [Reuters] Why Vivek Ramaswamy left DOGE [Washington Post] With the Davos worldview on the outs, the event has a different feel this year [Semafor] A Hollywood film used AI to make a better movie and people are mad. [The Ankler] YouTubers Colin and Samir on losing their homes in the LA fires [YouTube] A look at how Substack ads are sold, including at Big Technology [WSJ] Why Netflix’s subscriber number mattered this quarter, my thoughts on CNBC [YouTube] Number of The Week300 million Netflix reached 300 million paid subscribers at the end of 2024, with a total global audience of 700 million, far exceeding analyst expectations and Netflix’s own predictions. Quote of The Weekjust one more mean tweet and then maybe you'll love yourself… OpenAI CEO Sam Altman, letting off steam after a taking a barrage on X from Elon Musk and others this week. This Week on Big Technology Podcast: Google DeepMind CEO Demis Hassabis: The Path To AGI, Deceptive AIs, Building a Virtual CellDemis Hassabis is the CEO of Google DeepMind. He joins Big Technology Podcast to discuss the cutting edge of AI and where the research is heading. In this conversation, we cover the path to artificial general intelligence, how long it will take to get there, how to build world models, whether AIs can be creative, and how AIs are trying to deceive researchers. Stay tuned for the second half where we discuss Google's plan for smart glasses and Hassabis's vision for a virtual cell. Hit play for a fascinating discussion with an AI pioneer that will both break news and leave you deeply informed about the state of AI and its promising future. You can listen on Apple Podcasts, Spotify, or your podcast app of choice Thanks again for reading. Please share Big Technology if you like it! And hit that Like Button if you like efficient, open source, and independent tech news My book Always Day One digs into the tech giants’ inner workings, focusing on automation and culture. I’d be thrilled if you’d give it a read. You can find it here. Questions? News tips? Email me by responding to this email, or by writing [email protected] Or find me on Signal at 516-695-8680 Thank you for reading Big Technology! Paid subscribers get our weekly column, breaking news insights from a panel of experts, monthly stories from Amazon vet Kristi Coulter, and plenty more. Please consider signing up here.
© 2025 Alex Kantrowitz |
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