DeepSeek: Black Swan Challenge to American Model of Throwing Big Money at Big Tech and Much More

 Most everything associated with generative AI in the US is reeling. That includes stock markets. Yes, it could be considered a form of Black Swan, that is an unanticipated development that generates massive unanticipated impacts. 

That phenomenon is the development of AI model in China DeepSeek. It challenges the American Way of throwing massive money at tech and requiring even more money for the energy to produce AI. As Bloomberg reports:

" ... calls into question the vast spending by companies like Meta and Microsoft Corp. — each of which has committed to capex of $65 billion or more this year, largely on AI infrastructure — if more efficient models can compete with a much smaller outlay."

Essentially DeepSeek is everything you know about generative AI - and more. This year-old startup uses open source. So it benefits from how developers around the world can improve the software. When it responds to a prompt it includes an explanation of how it came to the answer. That enhances its credibility.

The weakness, at least so far, is that there are political constraints on this Chinese innovation. For example, it will not response to sensitive topics such as insurrection against the government of China. 

At the very least, US based AI players such as OpenAI will have to lower prices. More significant is that threatened is US leadership in technology. In addition, mocked is the notion that you have to throw big money to get big results. By extension the awe some have for billionaires can collapse. No, you don't need so much capital to do great things. And, do you really aspire after having multiple dwellings? 

The implications for Wall Street and, more generally, for ordinary investors, as with all Black Swans, could be game-changing. Elite law firms with AI practices such as Kirkland & Ellis and Paul Weiss now probably will have to scramble to guide clients in how to navigate the legal issues introduced by DeepSeek. 

In my career coaching I am bearing witness to vey regular folks starting up enterprises with little funding. In April I will speak on an O'Dwyer webinar on how to do this. Wealth could be decoupled from business success. Also minimalist lifestyles could become the new cool. Bob Wells is the Patron Saint of Affordable Living. 

UPDATE:  

The Nasdaq opens down more than 600 points.

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