DeepSeek continues to rattle markets

Summary

Marketplace Morning Report: DeepSeek Continues to Rattle Markets – January 28, 2025

Hosted by Liana Byrne and produced by Marketplace, this episode delves into the seismic impact of DeepSeek, a Chinese startup, on global technology markets. With insights from industry experts and on-the-ground reporting, the episode unpacks the ramifications of DeepSeek's advancements in artificial intelligence and the broader implications for major tech players like Nvidia and social media platforms under new leadership.

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1. Introduction to DeepSeek’s Market Impact

Liana Byrne opens the report by highlighting the disruptive influence of DeepSeek, a relatively obscure startup based in Hangzhou, China. The company has recently launched a low-cost AI chatbot that has unsettled investors globally, leading to significant downturns in tech stock markets across Asia and the United States.

“Deep Seek, a little known startup from Hangzhou in China is causing chaos on global markets,” Byrne states at [01:21].

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2. Market Reactions and Stock Declines

As DeepSeek's new AI model hit the market, investors grew increasingly wary of the potential shift in AI technology leadership. This apprehension translated into a noticeable dip in tech stocks internationally.

Saranjanath Tiwari from Singapore provides a detailed analysis:

“Technology stocks dived on Wall Street and Asia largely followed that here, especially tech stocks in Japan and the Nikkei was down around 1.7% at one point during trade,” he explains at [02:09].

He further elaborates on the reasons behind the decline, attributing it to DeepSeek's ability to produce efficient AI models at a fraction of the cost, challenging the valuation and dominance of established AI leaders like Nvidia.

“Shares in [Nvidia] fell 17% overnight and that wiped $593 billion from its market value,” Tiwari notes at [02:09].

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3. DeepSeek’s Technological Edge

The crux of DeepSeek’s unsettling presence lies in its groundbreaking approach to AI development. Unlike competitors, DeepSeek claims to utilize significantly fewer computer chips to train their AI models, navigating around the stringent restrictions on materials and tools essential for chip manufacturing.

“The company is claiming to use a fraction of the computer chips needed in the AI models,” Tiwari explains at [03:16].

This innovation has left industry experts and investors questioning the sustainability of high valuations for AI pioneers who may not be able to match DeepSeek's cost-efficiency.

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4. Broader Implications for the Tech Industry

The emergence of DeepSeek is not just a localized phenomenon but has sparked a global reassessment of AI investments. The sudden drop in Nvidia's stock underscores the fragility of tech market valuations in the face of rapid advancements by new entrants.

Byrne summarizes the sentiment:

“If this Chinese company can make an AI model that does it more cheaply, then why on earth are we investing and pumping up companies like Nvidia?” she questions at [03:10].

This points to a potential shift in investment strategies, where cost-efficiency and innovative breakthroughs could outweigh brand dominance and historical performance.

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5. The Intersection of Technology and Geopolitics

The episode also touches upon the intertwined nature of technology advancements and geopolitical dynamics. With DeepSeek operating out of China, its success resonates amidst ongoing tensions and competition between global superpowers in the tech sector.

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6. Social Media Platforms Under Scrutiny

Shifting focus, the report delves into the challenges faced by social media platforms, particularly under new leadership. Donald Trump’s claims that Microsoft is in talks to acquire TikTok amidst ongoing national security concerns highlight the volatile environment in which these platforms operate.

Daniel Rosny from the BBC examines the repercussions of Elon Musk’s leadership on platform X (formerly Twitter):

“There is a benefit to X. A lot of client-facing companies will agree on the ability to have instant direct communication with users,” he remarks at [06:33].

However, this comes with its own set of challenges, as Patrick Gensing from FC San Pauli criticizes the platform for fostering what he describes as “assaults on X, antisemitism, conspiracy theories.”

“It must serve people from all political persuasions. Free speech is meaningless unless you allow people you don't like to say things you don't like,” Gensing asserts at [05:56].

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7. Brands Reevaluating Their Presence on Social Platforms

The episode highlights how brands and organizations are reconsidering their association with platforms like X due to evolving policies and the platform's handling of content moderation. Companies like Apple and Disney have paused advertising, reflecting a broader hesitancy to engage with the platform under Musk’s tenure.

Andrew Cassidy from MBTA emphasizes the practical utility of X for real-time communication:

“When people were tweeting at the MBTA saying hey, my train's late, where is it? Or where's my bus? Someone could actually provide a definitive answer,” he explains at [06:59].

Despite the controversies, certain sectors continue to find value in the platform's ability to facilitate immediate user engagement.

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8. The Evolving Landscape of Social Media and Fact-Checking

The discussion also touches upon the changing dynamics of fact-checking and content verification across major social platforms, citing Meta’s decision to end fact-checkers for Facebook and Instagram. This shift raises concerns about misinformation and the reliability of information disseminated through these channels.

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9. Conclusion and Forward Look

As the episode concludes, it underscores the volatile interplay between technological innovation, market dynamics, and geopolitical factors. The rise of DeepSeek serves as a critical reminder of the rapid pace at which the tech landscape can change, urging investors and companies alike to stay vigilant and adaptable.

Liana Byrne signs off with a note of gratitude to listeners, encapsulating the essence of the morning's discussions.

“Have a great day and thanks so much for listening,” she concludes at [07:30].

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Key Takeaways:

• DeepSeek's Low-Cost AI Chatbot: Disrupting global tech markets by offering a more cost-effective AI model, challenging established players like Nvidia.

• Market Volatility: Significant drops in tech stock valuations reflect investor anxiety over AI advancements and company valuations.

• Geopolitical Implications: The success of Chinese tech firms like DeepSeek amid global competition underscores the strategic importance of AI technology.

• Social Media Dynamics: Leadership changes and policy shifts on platforms like X are influencing brand collaborations and user engagement strategies.

• Future Outlook: The tech and social media landscapes remain in flux, necessitating continuous monitoring of market and geopolitical developments.

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For more insights and updates, visit Marketplace and tune into future episodes of the Marketplace Morning Report.

Transcript

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[Liana Byrne]

It'S another day of tech turmoil on the markets Live in the UK this is the Marketplace Morning report from the BBC World Service. I'm Liana Byrne. Good morning. Deep Seek, a little known startup from Hangzhou in China is causing chaos on global markets. For the second day tech stocks fell on Asian markets and it's all because investors continue to be shocked by the release of Deep seeks low cost AI chatbot. The ChatGPT founder Sam Altman scalded an impressive model and welcomed the competition, but said his company OpenAI was committed to delivering better models. The BBC's Saranjanat is keeping an eye on this one from Singapore. Hello.

[Saranjanath Tiwari]

Hi there.

[Liana Byrne]

So essentially investors, they're just concerned about these advancements in China and that's having a huge effect in the stock market.

[Saranjanath Tiwari]

That's right. I mean technology stocks dived on Wall street and Asia largely followed that here, especially tech stocks in Japan and the Nikkei was down around 1.7% at one point during trade. So largely tracking what was going on in the US and the reason that this happened is because of the emergence of that low Chinese artificial intelligence model and it really made investors question the sky high valuation and dominance of AI pioneers. The likes of Nvidia, which has really been the poster child of the AI boom in recent years. Shares in the company fell 17% overnight and that wiped $593 billion from its market value. So lots of people around the world now saying, well, if this Chinese company can make an AI model that does the more cheaply, then why on earth are we investing and pumping up companies like Nvidia?

[Liana Byrne]

Yeah, what sets deep seeks low cost AI chat bot apart from the likes of ChatGPT.

[Saranjanath Tiwari]

The difference is the company is claiming to use a fraction of the computer chips needed in the AI models. And remember that this is coming against the backdrop of a lot of restrictions on the materials, the tools that are required in order to make computer chips which then train these models. They've managed to do it. It's not clear how and there's going to be many questions for a long time over exactly how they've done it so cheaply as well.

[Liana Byrne]

Okay, sir. Anjanath Tiwari, thank you so much for joining us on Marketplace.

[Saranjanath Tiwari]

Thanks a lot.

[Liana Byrne]

Now let's see the numbers. Investors aren't thinking too much about tariffs right now. It's all about AI. Nvidia's supplier Advantest was down 19% in two days, while the chip making equipment maker Tokyo Electron and a technology startup investor SoftBank Group slid 5%. And sticking with tech, US President Donald Trump says Microsoft is in talks to acquire TikTok. Both he and former President Joe Biden have been trying for years to get Tick Tock's parent company ByteDance, to sell its U.S. u.S. Operations for national security reasons. Now, at this point, I'm sure we all know that Elon Musk has a prominent role in Donald Trump's administration. But here's a question. How is proximity to the president impacting Musk's social media platform X? Some businesses and brands are evaluating where they post online and whether the evolution of the app formerly known as Twitter, meets their company values. Here's the BBC's Daniel Rosny scrolling through X.

[Daniel Rosny]

There might be some names missing from your feed from celebrities like Lizzo and Jamie Lee Curtis who say they'll no longer be posting to British newspaper group the Guardian, which described X as a toxic media platform. In Germany, Hamburg based soccer club FC San Pauli, which plays in the country's top league, the Bundesliga, became the first major football club in the world to.

[Patrick Gensing]

Blow the whistle on X after the US elections. We decided that it's over.

[Daniel Rosny]

Club spokesperson Patrick Gensing believes Musk could influence the upcoming German election.

[Patrick Gensing]

We have seen the whole time assaults on X, antisemitism, conspiracy theories, and it's not really sanctioned. So it's like an Elon Musk world. This is freedom of speech and we don't share this.

[Daniel Rosny]

Come on up here, Elon Musk. Musk has changed many things since he bought Twitter in late 2022 and he doesn't seem concerned about brands leaving. He's reinstated, banned accounts and repurposed moderation policies and practices. This is what Musk told the BBC five months after the takeover.

[Patrick Gensing]

It must serve people from all political persuasions. Free speech is meaningless unless you allow people you don't like to say things you don't like.

[Daniel Rosny]

Changing policies and accusations of increased antisemitism on the site led to companies like Apple and Disney pausing ads, although it's reported some are now back but spending a tiny fraction in comparison to what they're used to. There is a benefit to X. A lot of client facing companies will agree on the ability to have instant direct communication with users and that's why some, like Miami based tech journalist Rosa Jimenez Kano, believe brands should stay is.

[Liana Byrne]

A good communication internal communications channel. Maybe they don't want to put ads.

[Patrick Gensing]

But for relevant announcement is a way to communicate.

[Daniel Rosny]

There are sectors like travel and transport which rely on the platform daily. Andrew Cassidy is the senior director of Digital strategy and Engagement for the mbta. It's the transport system that serves the Greater Boston region with more than 800,000 daily riders.

[Andrew Cassidy]

When people were tweeting at the MBTA saying hey, my train's late, where is it? Or where's my bus? Or what's the best way to get from point A to point B? Someone could actually provide a definitive answer and kind of help people in the moment.

[Daniel Rosny]

X didn't respond to a request for comment on this report, but with Meta announcing the end of fact checkers for Facebook and Instagram and questions about whether TikTok could still be banned in the US, it's clear X isn't the only platform changing the landscape for companies. I'm the BBC's Daniel Rosney for Marketplace.

[Liana Byrne]

And I'm Lianna Byrne with the Marketplace Morning Report from the BBC World Service. Have a great day and thanks so much for listening.

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