28-01-2025
Chinese AI app DeepSeek could be bad for stocks but good for local startups
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As Globe tech columnist Hiawatha Bray noted, DeepSeek published a white paper revealing how it developed the model inexpensively,
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'DeepSeek is the next piece in the AI arms race,' said computer science professor Elke Rundensteiner at Worcester Polytechnic Institute. Even while spending billions less than its US rivals, and being forced to use slower chips due to US export limits, 'it rivals current AI giants in performance.'
So far, California has dominated Boston and other regions in raising venture capital backing for AI startups, Out west, most of the money has gone to companies developing underlying tech like ChatGPT developer OpenAI. Boston's ecosystem has focused on building applications that use AI, or in the case of MIT spinoff Liquid AI, creating its own version of much cheaper AI models.
VC Jeff Bussgang at Flybridge Capital Partners sees the plummeting cost of AI as a boon for local startups. 'We saw it with cloud computing and we are seeing it now with AI,' Bussgang said. 'As a result, we will see an explosion of demand and AI-based apps will benefit tremendously.'
Cheaper AI could also benefit public companies in the area that have been adding AI features. Shares of HubSpot and Klaviyo have gained about 11 percent each so far this week, as the companies have been incorporating AI services into their marketing and customer service software.
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But DeepSeek's low-cost AI tech may not be quite so beneficial for the stock market at large, where seven tech giants each valued at over $1 trillion dominate market indexes, the fallout could be more severe, and some have drawn
From the start of 1995 to March, 2000, the Nasdaq Composite Index increased almost 600 percent. Then over the weekend of March 18, 2000, Barrons magazine published a cover story headlined '
Within a year, the index had fallen more than 60 percent and didn't reach 5,000 again for 14 years.
The leaders of the current tech big seven, including Nvidia chief executive Jensen Huang and Apple chief executive Tim Cook, all will address Wall Street analysts in coming weeks as they report fourth quarter results. Their responses to the DeepSeek shockwave could make or break the Internet bubble analogy.
'This is likely to act as an overhang on the technology and energy sectors until a broad array of company management teams provide their own insight/perspectives during the Q4'24 earnings season,' a team of analysts at Goldman Sachs wrote on Monday.
Aaron Pressman can be reached at
