China's DeepSeek triggers global tech sell-off

let's talk about deep seek because it is mind-blowing and it is shaking this entire industry to its core the emergence of deep seek now putting pressure on the US tech names we told you all about it last week in Davos the buzz started growing about deep se's latest AI model being more efficient while running on a lot less a lot less Advanced Nvidia chips released last week it's already being called what is a major breakthrough as the app shows its work its reasoning uh it answers users prompts I app the way was spent basically all

weekend playing with it um it is the number one app I believe on Apple right now uh the product overtaking chat today uh as that uh on the App Store that way deep seek which was created by a Chinese hedge fund manager also capturing the attention of leaders as we mentioned at the world economic Forum last week in Davos we should take the development out of China very very seriously what we found is that deep seek which is the leading Chinese AI lab their model uh is actually the top performing or roughly on par with

the best American models if the United States can't lead in this technology we're going to be in a very bad place geopolitically now you can take a look right now at the AI related stock so Nvidia arm uh AMD Microsoft meta interestingly on that list given its open source we got to talk about the open source close Source bit of this as well and then that's a shocker to see Nvidia down by more than 12% right now absolutely and then you have Global chip stocks also in the red across the board ASM Holdings and others

there is the question I will say uh Al Alexander Wang made the point last week and it's it's become sort of the question mark about all of this which is you know he suggested on our air that it is possible that they were using some of the highest performing Nvidia chips perhaps as many as 50,000 of them to build this model now and they weren't supposed to have those chips right if that if that's if that's true not the size the dynamic is different if it's not true um then maybe all bets are off it's

possible by the way even if it is true meaning even if they use those chips to create this or at least partially to create this it is still a significantly more efficient and better model I think everybody agrees that right this moment I mean I I don't know if did you get to play it is mind-blowing I it it it looks really great I mean it it it it feels like it's that it's open source so people could test this out themselves but I can tell you all the tests that I do just to see

whether whether I think the writing is better whether I think that it can answer certain questions I mean it was not only faster it was more human the reasoning was is shocking I mean there were moments where I was like oh my God this we are we are so much I you you could feel the step change as a person it was it I will also say as exciting as it was there was an element where I became scared because I thought oh you know I had the opportunity to talk to all these people last

week and they all said the future is here and d d d and then you sort of see it and you go oh okay I I feel you in a in a different sort of visceral way so yes I think this is all happening at a level that I'm I when you when you mark your sort of AI uh history timeline in life I think this week this past week today and everything else will be on it I I I think Mark Andre uh put it really succinctly and really smartly when he said that this

feels like the Sputnik moment for for the AI race where China is really stepping in so not just what it can do but what it means for American dominance in AI what it means for the Chinese being able to step in and to have the Chinese actually open sourcing it meaning that that is going to be what goes around the world and to have the the cost factors that go into this uh huge huge step up and change and puts us a little bit on our back foot in trying to figure out what this means

I actually Wonder Sachi Nella would he tell you again today that he's still good for the 80 billion I think they still are good for the 80 billion I think there I think actually everybody's I think the processing power issue is there's there's an element of which you're going to still have to have the current sort of efforts underway I think the question longer term I think it's a longer term question can you recoup your investment I mean can you recoup your investment if that's the case well I think this is the big issue and

I think who's going to pay for it if they get one point and I don't know if we talked about it on squawk or might have been on worldwide exchange one of the things that I was hearing that was fascinating out there is there were so many CEOs were saying you know what I'm using open Ai and I'm playing around with anthropic to figure out what I need to do and then which is expensive for us and we don't really love that so we're playing around with what we need and then we're trying to figure

out whether how much of it we can replicate using llama which is the meta version of it but it's open source and effectively therefore free well and and you can have some control over it too as being open source you can do things that you end up this you're not so beholden to open AI but but that to me that's the issue so here we have a situation where if people are already starting to move towards open source models and I don't think that have been talked about publicly really that's a that's a whole kind

of Paradigm change just back to the question on Microsoft Microsoft shares down 6.8% this morning is there a point where SAA says okay maybe I'm not good for the 80 billion like I don't know I don't know I think he's still going to need this technology over the next five years the question is can yes can he go is he going to start using deep seek by the way there's a separate question which is you know if we think we have a problem with Tik Tok Oh I thought this instantaneously if we think we have

a problem with Tik Tok do we have a problem with this now interestingly this is a source model take and do your own put on your own so they're not own your unless there's something in it that we don't understand you know they talk about project Texas with I thought own Tik Tok looks like posers play compared to what this could potentially do be although this is open I mean this is open AI so you can take it and Source it yourself and figure something out from it so you're not storing on their servers anyway

it's fascinating I think if you're I do well I don't know I you know let's we we should call satu get him back because the truth is he does need some form of AI you know for his co-pilot and all of his other software but does it have to be does it have to be open and is there a way to do it more cheaply and not have to spend 80 billion the question is probably that over time they're going to have to spend less money I don't know if you saw he put out a

tweet uh just overnight called uh the I didn't know about this it's called the jevans Paradox and he um links to a Wikipedia page which I'll read to everybody if you'd like in economics the jeans's Paradox sometimes referred to as the jeans's effect occurs when technological progress increases the efficiency with which a resource is used uh reducing the amount of necess uh necessary for any one use but the Fallen cost of use induces increased demand enough that resources used is increased rather than reduced could be but does he still need to spend 80 billion to

get to the same place could he spend $50 billion and still get the same out of it if again if you can find ways to do this more cheaply if the architecture structure is such that you can actually get more efficient with all of these things maybe he doesn't have to spend the 80 billion I think he may still need to just because of the abundance of how much processing I mean look the guys who are I mean this um deep seek for the most part people are now running on their own laptops and doing

all sorts of things so they're their computers are not overwhelmed but if you decided you were doing this in the cloud or there was be a cloud-based version of it you'd still need a lot of processing power I will say just on top of his tweet um and this was just five hours ago he says the jevans Paradox strikes again as AI gets more efficient and accessible we will see its used Skyrocket turning it into a commodity correct uh we just can't get enough of though and so they just can't get enough of piece of

it may be the thing that hopefully helps them longer term but still I think it's a very big question right and and and if you're doing it so that consumers are basically doing this for free it's just who's paying the the way on this is there going to be are companies going to pay are they going to find cheaper ways to run some of the stuff themselves too