Amazon.com has joined Microsoft in offering access to Chinese startup DeepSeek's low-cost, open-source artificial intelligence training models. Earnings for Amazon stock are due Feb. 6 and management will likely comment on the sudden emergence of DeepSeek.
Controlled by Chinese hedge fund High Flyer, DeepSeek competes with U.S. companies like startups OpenAI and Anthropic as well as tech giants like Google-parent Alphabet and Meta Platforms. Meta has been the leader in open-source AI models but DeepSeek poses a challenge.
Amazon Web Services has offered AI app developers access to models from Anthropic, Meta and many other providers. Amazon has invested $8 billion in Anthropic.
Prices have been falling rapidly for software developers renting AI models via cloud computing services. AI model makers typically split revenue with cloud companies.
DeepSeek's prices are reportedly much lower than OpenAI or Anthropics.
Amazon Stock: DeepSeek AI Model
"With AWS, you can use DeepSeek-R1 models to build, experiment, and responsibly scale your generative AI ideas by using this powerful, cost-efficient model with minimal infrastructure investment," AWS said on its cloud computing website on Thursday.
On the stock market today, AMZN stock rose 2% to 239.42 in midday trading.
Meanwhile, a rivalry is brewing between DeepSeek and open source leader Meta, which offers its Llama family of models.
On Meta's fourth-quarter earnings call with analysts on Jan. 29, Chief Executive Mark Zuckerberg said: "I also just think in light of some of the recent news, the new competitor, DeepSeek from China, I think it also just puts — it's one of the things that we're talking about is there's going to be an open source standard globally. And I think for our kind of own national advantage, it's important that it's an American standard."
Amazon Stock: U.S., China Competition
The U.S. aims to stay ahead of China in the race to develop AGI, or artificial general intelligence. AGI capability is considered the highest form of AI, featuring humanlike or better cognitive capabilities.
The AI trend has relied mainly on large language models, or LLMs, which require massive amounts of data to be trained. Large language models allow users to interact with AI systems without the need to write algorithms.
The capabilities of open-source models, which are free to developers, have advanced rapidly.
Anyone can reuse open-source LLMs and build on top of them. As a result, more efficient open-source models are emerging that reduce the computing power needed to "train" LLMs, or essentially feed them data.
Falling Prices Commoditize AI Models
JPMorgan analyst Gokul Hariharan, in a report published Friday, said: "Significant cost differences in training of AI models with comparable reasoning performance brings into question the necessity of large-scale GPU investment, higher training costs and large cluster sizes, and whether better model performance in a cost-efficient manner can instead be achieved."
"The inference prices for users with DeepSeek R1 are only 3% to 4% vs. those of OpenAI-o1. Even before DeepSeek R1's introduction, AI inference costs have been dropping at around 85% to 90% per year, which has been a driving force in triggering new AI applications that were not previously possible or cost-effective," he added.
Amazon Stock: Cloud Vendors Divvy Up Business
Microsoft is the biggest investor in OpenAI, having provided over $13 billion in funding to the generative AI leader. However, Microsoft has moved away from being the exclusive provider of cloud computing infrastructure to OpenAI, which has turned to Oracle, Coreweave and others.
President Donald Trump recently announced the $100 billion Stargate AI project.
Despite close ties to OpenAI, revenue growth of Microsoft's Azure cloud business has disappointed amid capacity issues.
Microsoft's Azure business grew 31% year over year in fiscal Q2, at the low end of its guidance range and a deceleration from prior quarters. The company predicted Azure growth in the current quarter of 31% to 32% in constant currency, dashing hopes for a re-acceleration of growth in the second half of the fiscal year.
On its earnings call with analysts, management noted that Azure was offering access to DeepSeek training models.
Meanwhile, Amazon stock has gained 7% in 2025.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
