In the realm of artificial intelligence, the concept known as DeepSeek has captured the attention of global markets, particularly among foreign investment institutionsThe months leading up to and following the Lunar New Year saw DeepSeek making waves with its groundbreaking advancements, prompting investment giants such as BlackRock, Legg Mason, Schroders, and Morgan Asset Management to weigh in on its technological innovationsThe consensus among these institutions is that the implications of DeepSeek's breakthroughs stretch far across various sectors, indicating potential volatility in the semiconductor industry, yet an enduring increase in demand for AI computational power.
DeepSeek’s ascent is no mere accident, as it is the culmination of extensive research and development that has positioned it as a frontrunner in the AI sectorIts latest model, R1, was trained using approximately 2,000 NVIDIA H800 GPU chips, resulting in a training cost of about $5 million—dramatically lower compared to OpenAI's training expenses that reached a staggering $100 millionThis substantial reduction in resource usage highlights a significant innovation in AI model training, which has become a topic of discussion among financial analysts and industry experts alike.
Critics and analysts like those from Legg Mason argue that this leap in technological advancement forces investors to reassess the underlying hardware requirements that support the AI revolutionNotably, the semiconductor industry has experienced significant fluctuations as a result, with some leading companies witnessing drastic declines in their stock pricesThe unique training methodology that DeepSeek employs diverges from conventional approaches; eschewing traditional supervised learning, it opts for a reinforcement learning model that allows for rapid iteration and learning through trial and error
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Such an approach not only economizes on training time and cost but also amplifies the model's flexibility while minimizing inherent biases that arise from working with pre-labeled data.
Moreover, Morgan Asset Management posited that DeepSeek's commitment to open-source development signifies a transformative shift in how technology is shared and utilizedThis fosters an ecosystem in which global developers can contribute and benefit from collaborative innovation, thereby accelerating the pace of technological progressSuch practices have invigorated the AI landscape, aligning with the economic theory known as "Jevons Paradox," which suggests that technological improvements can lower resource usage costs and spur rapid demand growth.
Yang Jingyu, a senior fund manager from Morgan Asset Management, emphasizes that DeepSeek is not an overnight phenomenon but rather the result of continual exploration and innovation over the yearsEmerging from a landscape initially dominated by international tech giants, the Chinese AI industry boasts a diverse pool of talent—from entrepreneurial figures in tech to academic leaders among overseas Chinese communitiesThis foundational advantage has allowed them to integrate cutting-edge innovations with local commercialization efforts, culminating in globally recognized breakthroughs.
Yang underscores that the advent of DeepSeek's technology is emblematic of China's pivotal role in global industrial innovationHe contends that this success story affirms China as one of the most significant hubs for industrial advancement, suggesting that more innovative solutions will undoubtedly emerge while the recalibration of the value of Chinese tech companies continues.
As the effects of DeepSeek’s innovations ripple through the semiconductor supply chain, forecasts suggest that the capital market will face significant adjustments to how these sectors are valued
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According to Legg Mason, the semiconductor industry will be scrutinized for its broader implications on the AI ecosystemThis newfound volatility in demand for AI computational resources indicates a protracted period of uncertainty in the marketThey anticipate that as proxy AI becomes more prevalent, there will be a heightening demand for advanced reasoning algorithms as well as the next generation of chips, such as the GB200/300 models.
From BlackRock's perspective, the burgeoning AI sector—particularly advances represented by DeepSeek—signals an ongoing transformation within global marketsThe Chinese stock market reflects this sentiment, having experienced a rollercoaster of gains and losses, but now appears poised for structural opportunities as growth sectors reassert themselves.
Legg Mason foresees that the ongoing competition among AI devices will continue to stimulate robust demand for semiconductors, particularly for application-specific integrated circuits (ASICs) and advancements in data center networking technologyIn light of escalating geopolitical tensions and the recognition of AI as a strategic asset, they expect that the U.S. will keep imposing restrictions on China’s access to advanced AI chips and semiconductor manufacturing tools, along with enhancing its domestic AI infrastructure through initiatives like the "Gateway to the Stars" program.
Despite large tech corporations dominating AI capital expenditures, the rise of new, cost-effective open-source models—leveraging smaller-scale, more affordable hardware—promises to broaden the market landscape significantlyThis shift is particularly evident as traditional tech stocks face downward pressure, leading to a favorable turn for value stocks and non-cyclical sectors while government bonds receive boosts from productivity increases and potential deflationary trends
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Legg Mason retains a bullish outlook, asserting that AI advancements towards lower computation costs and higher efficiency could lay a strong, resilient foundation for the global economy.
Looking beyond the semiconductor landscape, industry insiders are increasingly convinced that the accelerated growth of AI technologies will create vast investment opportunities across diverse sectorsBlackRock’s Zhu Jiangyu notes that by 2025, strategic investments will continue to center around the AI revolution, green energy innovations, and the upgrading of China's manufacturing capabilities.
He envisions substantial opportunities arising from the intersection of AI and consumer electronics, autonomous driving, foundational infrastructure powered by AI, and the broader supply chain ramifications stemming from the green energy shift, particularly in the electric vehicle sector.
In Morgan Asset Management’s estimation, the emerging potential of AI as a transformative productivity force cannot be overlookedThey anticipate the tech industry to maintain its relevance as a primary investment narrative over the next several years.
According to Du Meng, the firm’s China deputy general manager and investment director, following the surging investment opportunities prompted by computational advancements, they foresee even broader opportunities arising from the widespread adoption of AI applicationsThis encompasses a field rich with investments in AI hardware and software, as well as the ensuing efficiency gains and model shifts within multiple industries brought forth by AI innovation.
In Schroders' analysis, the implications of AI's growth extend even to the energy sector, as the proliferation of smartphones, internet connectivity, and cloud computing accelerates data processing demands, which in turn raises electricity consumption needs—especially for data centers
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