DeepSeek's AI technology, which sparked a sell-off in AI stocks led by Nvidia, is "good news" for enterprise software companies like SAP, the CEO of the tech powerhouse said Tuesday.
"When you are selling software as a service and looking at our strategy, it's actually good news," SAP CEO Christian Klein told Investor's Business Daily.
DeepSeek exploded onto the tech scene this week with an AI assistant that quickly became the most downloaded free app on the Apple iPhone store on Monday. The AI tool was developed by the Chinese startup without using the cutting edge and expensive AI processors demanded by U.S. companies.
DeepSeek Buzz Triggered Tech Sell-off
The sell-off wiped out roughly half a trillion dollars in Nvidia's market cap, introducing the possibility that companies may not need to spend a fortune on sophisticated Nvidia chips to build AI systems.
The DeepSeek disruption touched off a debate in a critical and highly-lucrative segment of the tech market, enterprise software.
The success of the start-up's technology — and the claim that they did it for a fraction of the cost of other AI innovators — suggest that it is possible to dramatically reduce the hardware costs in building an AI infrastructure. That could eventually benefit enterprise software companies, SAP's Klein said. The software giant has been testing the technology as it considers adding DeepSeek to SAP's AI hub, he added.
DeepSeek underscores how tech has historically evolved, he argued.
"History repeats," SAP's Klein said. "Oftentimes, innovation starts at the infrastructure on the hardware side, but then it moves up the stack. The hardware becomes more like a commodity. Of course, (it's) very important."
More Players Entering AI Battle
"But more players are entering," he added. "You see the progress also with regard to the performance of these large language models or the chips. So it becomes cheaper. And this is where we are benefiting from, because we are sitting at the top, infusing AI, creating high-value use cases for businesses."
However, a debate rages on DeepSeek's impact on enterprise software and tech in general.
In a note, BNP Paribas Exane analyst Stefan Slowinski said Oracle investors "may be concerned" that the Stargate deal "may be scaled back." Oracle is one of the tech giants leading the creation of Project Stargate. The DeepSeek story broke just days after the Trump Administration launched its Stargate AI infrastructure initiative.
But BNP Paribas Exane also said that "while DeepSeek will likely remain a near-term overhang until investors regain confidence in demand trends for GPU compute, the recent pullback already discounts many of the potential risks, in our view."
"We believe demand for GPU compute is more durable than many expect, and Oracle's infrastructure can be repurposed for inference workloads should enterprise adoption accelerate," BNP Paribas Exane said.
On Adobe, the analysts told clients in a note: "If DeepSeek brings new efficiency to multimodal content generation, it may become even more difficult for Adobe to monetize its GenAI offerings."
DeepSeek Doubts
Still, major questions remain about DeepSeek's technology.
DeepSeek's AI model "has raised the prospect that the hundreds of billions of dollars currently committed to building out AI infrastructure and spurring strong demand underlying data center credit quality may be significantly overestimated," Morningstar analyst Victor Leung said in a Tuesday note.
However, the technology's "actual capabilities remain unclear," he added.
"If its capabilities do not prove to be as robust or its applications more limited, the market would likely conclude that significant processing power would continue to be required to support AI development, affirming AI infrastructure demand projections including that for data centers."
