Sightings – February 2025

Jan 29, 2025
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A New Phase for the AI Spending War?

“[The Chinese artificial-intelligence startup] DeepSeek claims to have trained one of its latest models for $5.6 million in computing costs —a fraction of what is currently spent on this side of the Pacific on the same activity. OpenAI’s GPT-4 model...launched in late 2023 cost more than $100 million to train.... In a podcast last year, [the head of AI-research firm] Anthropic...said the cost to train some models is approaching $1 billion....

“Much remains unknown about DeepSeek’s claims, including what sorts of [semiconductor] chips the company had access to despite [U.S. sanctions limiting the sale of advanced AI chips to Chinese companies].

Several chip analysts...disputed the notion that DeepSeek built something on par with advanced U.S.-based AI models at such a low cost. ‘DeepSeek DID NOT build OpenAI for $5 million,’ wrote Stacy Rasgon of Bernstein. ‘The DeepSeek moment is driving investors to shoot first and ask questions later,’ wrote Joshua Buchalter of TD Cowen....

“More important, such a technical breakthrough is unlikely to cool the AI race or even cut down the funds being poured into it.... ‘Increased competition rarely reduces aggregate spending,’ [Oppenheimer’s Edward Yang] wrote in a note to clients. Pierre Ferragu of New Street Research [wrote that] ‘DeepSeek is not a game changer, and on the contrary fits very well with the way we have seen the industry evolving in the last three years.’....

“[Indeed, the] AI spending war might just be entering a new phase.”

– From “DeepSeek Won’t Sink U.S. AI Titans,” a news report in the 1/28/25 Wall Street Journal, at bit.ly/3EfoNNm.

Ready to “Take Advantage of Volatility”

Jonathan Ferro, a Bloomberg TV interviewer at January’s World Economic Forum in Davos, Switzerland: “Let’s talk about the U.S. economy and the word you mentioned just a moment ago: optimism....”

Katie Koch, CEO of asset management firm TCW: “The dominant mood is extreme optimism — executives especially. What we’re hearing that this is going to be a very pro-business moment for America....

I think that’s all possible, but...a lot of that optimism is priced into the markets. The question is: ‘Is it sustainable and how much further can it go?’...”

Bloomberg’s Lisa Abramowicz: “Will there be a shock that causes people to realize maybe things are too optimistic?”

Koch: “[One speaker here at Davos claimed] we didn’t need to worry about the business cycle because it’s being superseded by all these megatrends. It made the hairs on the back of my neck stick up!...

My answer to you is, of course something is going to happen. That’s how the world works. And our job is to take advantage of the volatility. For active management, a volatile environment can be okay.”

– From a 1/23/25 conversation on the program Bloomberg Surveillance. The full interview is online at bit.ly/4h4sDYd.

Written by

Joseph Slife

Joseph Slife

Joseph Slife has been a news writer for the Associated Press, a college instructor, and a radio host. He and his wife Joye have three grown sons.

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