On Monday, the stock market went into a tizzy over a new AI model from Chinese company DeepSeek. It seemed to be just as powerful as many of its American competitors, but its makers claimed to have made it far more cheaply, using far less computing power than similar AI apps like ChatGPT, Claude, or Gemini. In one day, hundreds of billions of dollars were wiped off the valuations of companies related to AI.This week, investors seemed suddenly to change their minds about what our AI future would look like and which companies will (or won't) profit from it. Will we really need all those high-end computer chips, after all? What about power plants to provide electricity for all the energy-hungry AI data centers? On today's show – how DeepSeek might have changed the economics of artificial intelligence forever.This episode was produced by Willa Rubin with an assist from James Sneed. It was edited by Keith Romer and engineered by Neil Tevault. Research help from Sierra Juarez. Alex Goldmark is Planet Money's executive producer.Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: What major event affected the stock market recently?
Just a note, in this episode, we will at some point talk about specific AI and tech companies, including Meta, Google, Microsoft, and Anthropic, all of which are current financial supporters of NPR. Here's the show. This is Planet Money from NPR. Imagine us at Planet Money, rolling out of bed late on Monday morning, still in our cozy pajamas.
Yeah, we got our Teenage Mutant Ninja Turtle slippers on. We got our cup of coffee.
Big yawn, turn on the old TV, and oh my, what is happening in the stock market right now? Uh, yeah. the single largest loss in a day of market capitalization in history.
What was happening? It was apparently some kind of AI apocalypse? Okay, so AI apocalypse, not so sure about that. Okay, fine, whatever. But without a doubt, this is a monumental shift.
Yeah, because on Monday, AI-related stocks started plummeting and TV-related people started grasping for big metaphors. It was an earthquake today in the world of artificial intelligence. The seismic AI event, a new-ish AI model from a company called DeepSeek.
Hello and welcome to Planet Money. I'm Mary Childs.
And I'm Kenny Malone. Today on the show, call it an artificial intelligence earthquake, call it an AI apocalypse, but Monday was not just a market freakout. I mean, it was that. Markets lost hundreds of billions of dollars, but it was also a teachable moment.
Oh, yes. Because if we look at these specific companies that got slammed on Monday and a few that benefited, we can see pretty clearly what people with money are betting our AI future looks like. And this week, the AI model from Deepsea has them betting on a very different looking future.
Or as Jim Cramer so artfully put it. This week has been a tectonic shift in assumptions about how the world is going to look. So let us first discuss how those assumptions became assumed. We shall visit a simpler ancient time.
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Chapter 2: What is DeepSeek and why is it significant?
I've been thinking about, like, should Monday have a name? Like, Black Friday had a name, you know? And I've been trying to make this one work. Yeah. Monday-eye apocalypse. It's not bad. It's not bad. You know... And so we shall now dissect and make meaning of the Monday-i apocalypse, starting with Angelo's specialty, the tech sector.
So which tech stocks had an awful Monday-i?
So when you kind of look at some of the names that got hit the most, I mean, essentially chip makers that are heavily exposed to the data center market. And, you know, that would include Broadcom, Marvell, Micron. Is it Marvell? I've been saying Marvel this whole time. Like a nerd who reads comics. Okay. Whoops. So Marvell, specifically NVIDIA, was the one that got the most attention out there?
Ah, yes. NVIDIA. NVIDIA manufactures top-of-the-line processors that have become the not-very-secret sauce that American-made AI models need in order to do the unfathomably large amounts of computing required to train and run AI models. If AI is the gold, NVIDIA is selling the picks and the shovels.
So for a lot of the people who were interested in investing in the brave new AI future, NVIDIA seemed like a good place to do it, especially because it has actually been quite hard to invest directly in the AI companies. Like some of the biggest companies developing the models, OpenAI, Anthropic, they do not have shares you can just go and buy. They're not publicly listed, not yet at least.
All of this is why NVIDIA, seemingly overnight, has become one of the most valuable companies on the planet. In 2020, you could buy NVIDIA's stock for like $6. Last week, $142. That is like 23x growth.
Basically, because the only way the AI revolution can happen is with the fancy AI chips from NVIDIA. And in fact, NVIDIA was seemingly so important that in 2022, the United States banned NVIDIA's most powerful chips from being sent to China to preserve America's AI advantage for national security reasons.
You could not overstate NVIDIA's value. And then enter DeepSeek, this Chinese hedge fund apparently building a top-of-the-line AI model even though they weren't allowed to build it on the very best AI chips from NVIDIA. Because Chinese companies aren't allowed to buy them.
Which... The markets seemed to think perhaps meant NVIDIA was not quite as important to the AI revolution as they thought. And on Monday, NVIDIA's stock price fell so much, nearly 20%.
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Chapter 3: How did DeepSeek challenge existing AI assumptions?
And those companies, they got hit on Monday, too, including a company called the Texas Pacific Land Corporation, which is basically just some giant chunks of land in Texas that have oil and natural gas. Even that got whacked by the deep seek news on Monday.
So, yeah, that shows you like how how the tentacles of this stretch out.
The Monday Eye Apocalypse. was not about whether or not there will be an AI revolution. If anything, the introduction of deep seek means more AI, lowering the barrier to AI, making it cheaper to use for, I don't know, whatever your AI mind can dream up.
All your great ideas.
There you go.
getting into it. And there are two categories that you'll see companies sorted into AI enablers and AI adopters. Enablers are the companies that are basically the supply chain to make AI models. Chipmakers, power companies, the AI model companies themselves.
And then the AI adopters. Those are all the companies that stand to benefit from using AI. And really, what this week was about was like a shift away from the enablers and arguably a bit towards the adopters.
Yeah, the shift away from the chipmakers and the energy companies was dramatic. You... have to look a little bit harder, squint a little bit to see the market moves towards the adopters. But one example people point towards, Salesforce. They have basically made their whole thing, their identity, adopting and using AI. And on Monday, their stock was up 4%.
And I think there is one other huge assumption that was challenged this week. Up until Monday, the market seemed to be confident that American AI companies had a moat around this technology, that the barriers to entry were just so enormous that no one else was going to win this arms race.
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