52 Weeks of Cloud

DeepSeek R2 An Atom Bomb For USA BigTech

Episode Summary

DeepSeek R2, expected in April/May 2025, threatens to disrupt tech markets by offering AI services at potentially 40 times lower cost than competitors like OpenAI and Anthropic. This Chinese innovation could trigger a "race to zero" in AI pricing, turning what was thought to be a high-margin business into a commodity service like cloud computing. Major tech stocks (Microsoft, Google, Meta) could face significant devaluation as their massive AI investments might never return expected profits. NVIDIA appears particularly vulnerable as DeepSeek demonstrates efficient performance on older, cheaper chips—ironically a result of US chip export restrictions forcing innovation. With tech stocks already declining and global distrust of US technology growing, DeepSeek R2 could accelerate a shift toward open-source, locally-hosted AI solutions that prioritize data privacy, ultimately revealing generative AI as a useful tool that augments rather than replaces human workers.

Episode Notes

Podcast Notes: DeepSeek R2 - The Tech Stock "Atom Bomb"

Overview

• DeepSeek R2 could heavily impact tech stocks when released (April or May 2025)
• Could threaten OpenAI, Anthropic, and major tech companies
• US tech market already showing weakness (Tesla down 50%, NVIDIA declining)

Cost Claims

• DeepSeek R2 claims to be 40 times cheaper than competitors
• Suggests AI may not be as profitable as initially thought
• Could trigger a "race to zero" in AI pricing

NVIDIA Concerns

• NVIDIA's high stock price depends on GPU shortage continuing
• If DeepSeek can use cheaper, older chips efficiently, threatens NVIDIA's model
• Ironically, US chip bans may have forced Chinese companies to innovate more efficiently

The Cloud Computing Comparison

• AI could follow cloud computing's path (AWS → Azure → Google → Oracle)
• Becoming a commodity with shrinking profit margins
• Basic AI services could keep getting cheaper ($20/month now, likely lower soon)

Open Source Advantage

• Like Linux vs Windows, open source AI could dominate
• Most databases and programming languages are now open source
• Closed systems may restrict innovation

Global AI Landscape

• Growing distrust of US tech companies globally
• Concerns about data privacy and government surveillance
• Countries might develop their own AI ecosystems
• EU could lead in privacy-focused AI regulation

AI Reality Check

• LLMs are "sophisticated pattern matching," not true intelligence
• Compare to self-checkout: automation helps but humans still needed
• AI will be a tool that changes work, not a replacement for humans

Investment Impact

• Tech stocks could lose significant value in next 2-6 months
• Chip makers might see reduced demand
• Investment could shift from AI hardware to integration companies or other sectors

Conclusion

• DeepSeek R2 could trigger "cascading failure" in big tech
• More focus on local, decentralized AI solutions
• Human-in-the-loop approach likely to prevail
• Global tech landscape could look very different in 10 years