China's DeepSeek AI is leading investors to question Silicon Valley's dominance in AI. The Hangzhou-based company supposedly spent only £4.49 million to develop the chatbot, compared to billions spent by leading US AI companies. The DeepSeek AI chatbot challenges Silicon Valley's narrative that high capital spending is necessary to build the most advanced AI models.
As a result, US and European stocks led by AI giants were trading in red on 27th January, wiping out £86.7 billion from the fortunes of the world's 500 richest people, especially billionaires whose wealth is linked to AI.
Nvidia Corp. (NASDAQ:NVDA) CEO Jensen Huang lost £16.15 billion or 20% of his wealth in one day. Meanwhile, Oracle Corp.'s (NYSE:ORCL) Larry Ellison' lost £18.15 billion, 12% of his fortune. At the same time, Dell Technologies Inc.'s (NYSE:DELL) CEO, Michael Dell, lost £10.44 billion, and Binance Holdings's Changpeng Zhao's wealth dropped by £972.23 million. The S&P 500 and the Nasdaq Composite index tanked 1.46% and 3.07% in the past day.
Most of the "magnificent seven" closed lower yesterday, including Elon Musk's Tesla Ltd. (NASDAQ:TSLA). However, the wealth of Meta Platforms (NASDAQ:META) CEO Mark Zuckerberg and Amazon (NASDAQ:AMZN) founder Jeff Bezos witnessed their wealth increase by £3.45 billion and £507.87 million, respectively, as their company stocks rebounded after a momentary decline.
Silicon Valley's Elevated AI Spending Despite Limited Revenue
Zuckerberg said last week that Meta Platforms will spend up to £52.23 billion on AI projects in 2025, well above Wall Street estimates. According to a Bloomberg Intelligence report, AI spending across all major tech companies will reach £160.72 billion this year.
Despite limited revenue from massive capital spending on AI, markets have rewarded US tech stocks with record-high valuations for years. Surging valuations for AI hyperscalers like Meta Platforms and Microsoft Corp. (NASDAQ:MSFT) since OpenAI's ChatGPT launch in late 2022 strengthened the trend to spend huge sums to develop and run AI systems using the latest semiconductors and energy supplies.
In turn, top US-based AI companies drove 2024's year-long market rally, translating to historic wealth gains for company owners. Huang's net worth jumped 800% to £97.23 billion since early 2023. Elsewhere, Zuckerberg's wealth increased by 385% to £184.02 billion while Bezos' fortuned soared by 133% to £204.11 billion during the same period.
DeepSeek App Surpasses ChatGPT On The Apple AppStore
DeepSeek's free R1 chatbot secured the top position on the Apple App Store, surpassing ChatGPT soon after its launch last week.
China's AI chatbot developed the free model at a fraction of the development costs for ChatGPT and Anthropic's Claude. The feat could be attributed to the company's innovative resource optimisation approach to maximising software potential.
The Hangzhou-based company has been building AI models since 2023 and developed its latest model without major investments and cutting-edge chips.
While many experts believe Chinese firms have limited access to powerful graphics processing units (GPUs), Scale AI CEO Alexandr Wang recently told CNBC that despite US export controls, DeepSeek and similar Chinese firms likely have more GPUs than Silicon Valley estimates.
"The Chinese labs have more H100s than people think," Wang said, referring to Nvidia's leading AI chips. "My understanding is that DeepSeek has about 50,000 H100s, which they can't talk about, obviously, because it's against the export controls that the US has in place."
The latest surge in DeepSeek R1 AI chatbot downloads made it difficult for the app developers to keep the app online, which suffered outages, compelling the company to limit signups to users with Chinese phone numbers.
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