China-based DeepSeek, with the prospect of running meaningful AI cheaper, faster, better, has sent the shares of technology companies into a shaky dive.
The AI chatbot, free to use and open-source, is claimed to be cheaper to run while also using less data than its closest competitors, such as OpenAI's ChatGPT or Meta AI.
Not only did the release of the model worry US investors - AI chip maker NVIDIA lost $US589 billion ($A936 billion) in market capitalisation - but local markets were also spooked.
According to Reuters, shares of AI software firm Appen fell 3.3% and AI chipmaker Brainchip lost 10.3%, while data centre landlords Goodman Group, NEXTDC and DigiCo Infrastructure REIT fell 6.4%, 6.2% and 11.1%.
In the advertising world, the global holding companies are throwing capital at AI, seeking to streamline production and back office functions and give staff a creative edge.
WPP is betting big on AI. The company is spending £250 million ($A484 million) each year on AI, which the group believes will enhance, not replace, human creativity.
DeepSeek’s R1 puts a big question mark on the viability of current AI plays.
“The key premise of that is that DeepSeek reportedly trained a highly competitive foundational model using a fraction of the computing resources required for comparable ones, then also inferring at a much lower cost,” said analysts at investment bank UBS.
“DeepSeek, with its v3 model, already contributed to deflation in China AI computing … but now, investors may initially conclude that it could be shifting one of the industry’s paradigm of ever more investment being required to train larger and larger models.”
Geoff Webb, a professor at Monash University's department of data science & AI, said the emergence of DeepSeek is a significant moment in the AI revolution.
"Until now it has seemed that billion dollar investments and access to the latest generation of specialised NVIDIA processors were prerequisites for developing state-of-the-art systems," he said.
“This effectively limited control to a small number of leading US-based tech corporations. Due to US embargoes on exporting the latest generation of NVIDIA processors, it also locked out China.
“DeepSeek claims to have developed a new Large Language Model, similar to Chat GPT or Llama, that rivals the state-of-the-art for a fraction of the cost using the less advanced NVIDIA processors that are currently available to China.
“If this is true, it means that the US tech sector no longer has exclusive control of the AI technologies, opening them to wider competition and reducing the prices they can charge for access to and use of their systems."
Webb said that looking beyond the implications for the stock market, current AI technologies are US-centric and embody US values and culture.
"This new development has the potential to create more diversity through the development of new AI systems," he said.
“It also has the potential to make AI more accessible for researchers around the world both for developing new technologies and for applying them in diverse areas including healthcare.”
DeepSeek is a relatively unknown, according to MIT Technology Review.
"Based in Hangzhou, China, it was founded in July 2023 by Liang Wenfeng, an alumnus of Zhejiang University with a background in information and electronic engineering.
"It was incubated by High-Flyer, a hedge fund that Liang founded in 2015. Like Sam Altman of OpenAI, Liang aims to build artificial general intelligence (AGI), a form of AI that can match or even beat humans on a range of tasks.
"Training large language models (LLMs) requires a team of highly trained researchers and substantial computing power. In a recent interview with the Chinese media outlet LatePost, Kai-Fu Lee, a veteran entrepreneur and former head of Google China, said that only “front-row players” typically engage in building foundation models such as ChatGPT, as it’s so resource-intensive."
In Australia, the Select Committee on Adopting Artificial Intelligence recently called for laws to regulate high-risk uses of AI at the whole-of-economy level, warning that AI technologies can cause “catastrophic harm” due to its capabilities not being fully understood.
in September, a proposals paper outlined preventative measures that would require developers and deployers of high-risk AI to take specific steps.
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