DeepSeek resets the board
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Illustration: Sarah Grillo/Axios
Davos consensus last week was that the U.S. had a giant lead in the AI race, with the only real question being if there would be enough general contractors to build all of the needed data centers.
- Ummm ... maybe not.
Driving the news: China's DeepSeek appears to have built AI models that rival OpenAI, while allegedly using much less money, chips, and energy.
- It's an open-source project hatched by a hedge fund, which at least for now seems aimed at developers instead of at enterprises or consumers. But that product focus could expand, particularly given that DeepSeek yesterday topped Apple's App Store.
Why it matters: This could be an extinction-level event for venture capital firms that went all-in on foundational model companies. Particularly if those companies haven't yet productized with wide distribution.
- The quantums of capital are just so much more than anything VC has ever before disbursed, based on what might be a suddenly-stale thesis.
- If nanotech and web3 were venture industry grenades, this could be a nuclear bomb.
- Investors I spoke to over the weekend aren't panicking, but they're clearly concerned. Particularly that they could be taken so off-guard. Don't be surprised if some deals in process get paused.
Yes, but: There's still a ton we don't know about DeepSeek, including if it really spent as little money as it claims. And obviously there could be national security impediments for U.S. companies or consumers, given what we've seen with TikTok.
The bottom line: The game has changed.
