How DeepSeek is stifling AI development and funding

This week, the tech industry received a expensive and extremely significant wake-up call when it was revealed that Chinese newcomer DeepSeek had created an sophisticated AI model that only needed millions of dollars in development costs.

The news caused US AI leaders to lose more than$ 1 trillion in total market value, including nearly$ 600 billion from chip king Nvidia alone, despite concerns about DeepSeek security and the possibility that it may have copied ChatGPT.

The DeepSeek reports even suggested that the current AI investment and development model may soon need to be revised.

Last week, DeepSeek unveiled an AI product that you perform as well as ChatGPT, but it costs just a million dollars to develop. News

However, rather than a bastion of small-scale disrupters and businesses, the vast majority of AI money comes from software companies such as Microsoft, Alphabet and Meta.

Former President Joe Biden warned in his “tech-industrial sophisticated,” which is being ruled over by an emerging elite and threatens fundamental institutions and perhaps even democracy itself, in his farewell address last year. &nbsp,

Today’s Internet is dominated by big tech companies like Google, Facebook, Apple, Microsoft, and Amazon.

Taken together, these digital conglomerates are worth$ 12 trillion, lording over the US stock market, and earning the moniker” The Magnificent Seven”.

The Magnificent Seven has stowed a large portion of their wealth ‘ coming on AI, even as DeepSeek threatens to destroy their rule. Should we be worried?

” If Big Tech continues to dominate the AI era, we risk]cultivating a culture ] where users are products and their data is the most valuable commodity”, says Tom Serres, co-founder of Nautilus Asset Management, referring to Big Tech’s insatiable appetite for data, which it uses to target ads at users.

Although AI does seem to be at the forefront of innovation and option, it is largely funded by national-scale investments from reputation tech giants.

Microsoft recently&nbsp, announced&nbsp, that it will spend$ 80 billion on AI data centers this year, more than the United Kingdom’s entire defense budget. It has also invested billion in OpenAI, manufacturer of ChatGPT. &nbsp,

DeepSeek is already the target of complaints that OpenAI’s ChatGPT was a copy of its technology. Cnet

Over at Google, Demis Hassabis, CEO of Google’s AI-focused DeepMind division &nbsp, the company will spend more than$ 100 billion to develop AI technology. Amazon is investing$ 8 billion in ChatGPT rival Anthropic, as well as$ 3 billion in its own data center construction, as well as$ 8 billion in its own AI cards development.

Twitter user Meta recently&nbsp, projected&nbsp, that it would spend$ 35-40 billion in AI and its universe arm Real Labs, including billion on chips made by Nvidia. &nbsp,

Apple’s spending spree saw it gain , &nbsp, , &nbsp, and lots of different companies in the past few years. Elon Musk&nbsp, said&nbsp, that any company that&nbsp, doesn’t spend a minimum of$ 10 billion a year on AI like Tesla won’t be able to compete.

According to Douglas Heintzman, main precursor of the think tank BRI,” the great players we think of as having enormous advantages in the age of AI were themselves upstarts not so long ago that took on the incumbents of their day.”

Big Tech even got a boost from the new Trump administration, which announced a$ 500 billion AI “moonshot” initiative backed by several of these companies.

Only governments can come close to matching Big Tech’s grant. To wit, sovereign wealth funds from Saudi Arabia, and the Gulf Countries have joined the party, plowing billion into high-profile AI offers.

If these companies can get up all the vital components, pump up the best people, and leverage their market position in search, social media, e-commerce, and robotics to cross-sell their AI products, can anyone else thrive? &nbsp,

The tech industry is in a constant state of reinvention, and the next big frontier could very well be the pairing of AI with cryptocurrencies. AFP via Getty Images

There are only so many splashy upstarts and so many governments with the resources and political motivations like the one in China, although there might be a fancy Beijing-backed upstart like DeepSeek. &nbsp,

Perhaps the governments of the West should enact new laws to control the tech ghettos. However, government intervention alone will not, and may even, make the situation worse. For instance, Washington may codify new laws under the guise of” AI safety” and make it more difficult for smaller companies to compete.

To fuel ongoing innovation cycles, AI requires that those smaller businesses to grow into larger ones. Don’t forget that” the big players we consider to have had a significant advantage in the era of AI were themselves upstarts not long ago that challenged the established players of their day,” says Douglas Heintzman, chief catalyst of the BRI, a think-tank. Companies like Meta and Microsoft are actually lowering the competition’s favor and encouraging future innovation by investing so heavily in AI today. &nbsp,

The AI that” currently dominates cannot be trained on consumer-level computers”, says Joseph Geraci of Netramark. NetraMark

According to Serres of Nautilus Asset Management, Big Tech dominates AI investment because the raw computing power needed to create AI models like ChatGPT was once thought to be pricey and expensive, pricing out smaller players. But that seeming lead is illusory.

After all, DeepSeek was reportedly trained and built with only$ 6 million, which is a significant investment compared to the billions of dollars many believed needed to create an AI system that could match or even surpass ChatGPT from OpenAI. Anyone can audit the code and build on top of it because the DeepSeek model is open source. &nbsp,

DeepSeek is praised by tech entrepreneurs and venture capitalists, but caution is raised that it demonstrates China’s level of AI is far higher than we thought. Legendary venture capitalist Marc Andreessen referred to the arrival of DeepSeek as” the Sputnik Moment” of AI.

The launch is causing tremors across Big Tech, DeepSeek’s debut caused the stock of AI chipmaker Nvidia to drop by more than 15 % in a single trading day, and now analysts are questioning whether Big Tech was simply overspending on AI by throwing money at a problem without understanding it at a deeper level.

Any company that&nbsp, doesn’t spend a minimum of$ 10 billion a year on AI like Tesla won’t be able to compete, observes Elon Musk. AFP via Getty Images

Joseph Geraci, founder and both chief strategy and technology officer at NetraMark, adds that the AI that” currently dominates cannot be trained on consumer-level computers”, instead requiring hundreds of supercomputers known as” GPUs” that can cost$ 40, 000 a pop. The showstopper announcement from DeepSeek demonstrates how much less equipment and financial investment is required for deep AI work. &nbsp,

Darwin. AI CEO Sheldon Fernandez says” AI can be used as a&nbsp, substitute&nbsp, for human creativity and logical reasoning”, posing both a risk and opportunity to many professions and opening new doors for start-up founders. Mark Zuckerberg , saying AI can perform like a “mid-level” software engineer. &nbsp,

How long until they can outperform the best? Indeed, surfaced that OpenAI was working on an AI “agent” with PhD level intelligence. Sam Altman, CEO of OpenAI, once said AI would enable the first “billion dollar one person company” with AI handling much of the workload such as finance, marketing and logistics.

Trump has promised to pump additional billions into AI via is newly-announced “moonshot” project. REUTERS

What’s more, thanks to AI, entrepreneurs may not even need to know how to code. Your AI “programmer” can do it for you as the industry increasingly “lower]s ] &nbsp, the barrier to value creation”, says Heintzman. All of this will require vast sums of investment, though now with the arrival of DeepSeek, the industry’s financing model may be ready for a rethink.

Startups can also succeed by specializing, leveraging the tech built by others, and creating new applications. Fernandez of Darwin. The best new startups, according to AI, will” train and enhance core models in highly specific and technical ways to achieve their goals.”

The result will be AI startups for law, engineering, construction, and countless other industries. This raises a separate issue of platform risk, where building on someone else’s technology, whether their AI model or their cloud, makes you beholden to them. &nbsp,

It is the technology behind Bitcoin, called blockchain, however, that promises to shake up Big Tech’s platform investment economics once and for all.

Indeed, it is often the combination, or&nbsp, convergence, of two or more technologies that have the biggest impact — and bang for the investment buck.

Consider how smartphones combined with wireless networks and GPS led to mobile apps, location-based services, and more. Today it may be AI and crypto. &nbsp,

Sheldon Fernandez, CEO of Darwin. AI, which was purchased by Apple.

This manifests in a number of ways. Most importantly, in crypto, users can pool their computers together and make them available to the public as “decentralized clouds”, that can compete with centralized systems, such as Microsoft Azure or Amazon Web Services. This will make it easier for developers to train and test AI models and also lower their costs. Newer and cheaper AI models will increase the number of AI agents, who, since they can’t open a bank account, must use crypto to do transactions. &nbsp,

The technology industry is in a constant state of reinvention. The PC, which ushered in the Internet era and the mobile web, was replaced by the old-fashioned mainframe computers.

AI is currently stumbling through the windows and rattling the walls of the big-name technology companies.

Biden warned against the “tech-industrial complex” and a rising cadre of tech-based oligarchs during his final speech in office. Getty Images

With its low-cost development and investment model, it’s not yet clear whether DeepSeek will become the force that upends the status quo. &nbsp,

After all, DeepSeek is small, but it has China at its back — which is both a boon and a blessing.

Financial columnist Charles Gasparino stated this week,” I’m skeptical about the DeepSeek threat. I’m not saying it’s a deep-fake, but I just don’t trust anything that comes out of China”. The fight for the AI future will be competitive, but one thing we can count on is change.

Alex Tapscott is the author of&nbsp,” Web3: Charting the Internet’s Next Economic and Cultural Frontier” &nbsp, and managing director of the Digital Asset Group, a division of Ninepoint Partners LP

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