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DeepSeek May Be Leveling the AI Playing Field

Just a day after flipping out about DeepSeek’s scary good cheap AI, Silicon Valley is saying the competition is going to make us all better.

Photo of the DeepSeek app on an iPhone
Photo via Connor Lin / The Daily Upside

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Just one day after flipping out about a scary good cheap AI app conjured by a Hangzhou startup, Silicon Valley is saying DeepSeek is going to make us all better.

DeepSeeking the Truth

Make no mistake: DeepSeek’s impressive debut made a splash for a reason. But experts told The Daily Upside the model’s arrival is more likely to trigger industry right-sizing and price-culling than to represent an extinction-level event for competing US firms. And, perhaps most importantly, even with DeepSeek’s considerable efficiency gains, compute power is still the industry’s most important metric. It’s likely why Nvidia’s share price rebounded nearly 9% on Tuesday after suffering the biggest single-day loss in US history on Monday. Overall, the tech-heavy Nasdaq Composite index climbed over 2% Tuesday after falling 3% on Monday.

Firms such as OpenAI and Anthropic that have poured billions of dollars and vast amounts of resources into building foundational AI models are having a bad week, along with a bunch of all-in VCs. But just about every other player in (or adjacent to) the AI space is seeing opportunity:

  • “The narrative over the last couple months has been that AI is only good for the top-tier VCs that can write [massive] checks, and the mid-tier VCs are getting left in the dust,” Wil Schroter, founder and CEO of Startups.com, told The Daily Upside. “Now, all of a sudden, all these mid-tier VCs with smaller checks matter a whole lot more.”
  • Meanwhile, The Information reported Tuesday that many firms that had been using models from competitors like OpenAI have quickly pivoted to DeepSeek’s far-cheaper model, reducing AI spend costs by as much as 66% in the process.

The Big Short-Sightedness: For AI developers, DeepSeek’s arrival — and its open-source nature and willingness to share its research — offers a new foundation to build on. Which is why some tech leaders see the moment as less Sputnik and more akin to Google spilling the secrets of its distributive algorithms to the world way back in 2004. Schroter also cautions against the “short-sightedness” of declaring DeepSeek as the ultimate AI winner, adding “they just made gas 10 cents a gallon. Now everybody can do stuff, way more than they could do five minutes ago.”