Think DeepSeek has cut AI spending? Think again
The conference highlighted the increasing need for more advanced AI capabilities in various industries. Attendees expressed a desire for more cost-effective solutions to meet this demand. It is evident that the market is seeking ways to make AI technology more accessible and affordable. The discussion emphasized the importance of balancing innovation with practicality in the AI space. Overall, the event shed light on the challenges and opportunities in the AI industry.
The stock market collapse in January, prompted by the sudden fervor for the Chinese artificial intelligence (AI) breakthrough DeepSeek AI, and its apparently much cheaper computing approach, might make you think that companies are dramatically reducing their spending on chips and systems for AI. A generative AI conference on Wednesday in New York, hosted by the Bloomberg Intelligence unit of Bloomberg, left me with the opposite impression: the hunger to expand the use of generative AI is so great that spending is set to continue to drive enormous investment.
Generative AI: Scaling Laws Post DeepSeek
Titled "Generative AI: Scaling Laws Post DeepSeek," the daylong event featured constant references to how demand will drive greater spending. "We had ten panels today, and not a single person on those panels said we have more capacity than we need," said Mandeep Singh, a senior technology analyst with Bloomberg Intelligence, and an organizer of the event. "And no one was talking about a bubble" in infrastructure, added Singh. "The most important question right now in front of everybody is the AI infrastructure build. Yeah. Where are we in that cycle?" Anurag Rana, Singh's colleague at Bloomberg Intelligence, and the senior IT services and software analyst, told me.
"Nobody knows" for certain, said Rana. However, the hope raised by DeepSeek AI is that a lot of work can be done with less expense. "DeepSeek shook a lot of people," he said. "If you are not needing that many GPUs to run models, then why do we need $500 billion for the Stargate project," he observed, referring to a planned US AI project run by Japan's SoftBank Group, OpenAI, and database giant Oracle.
Everyone in the industry, said Rana, hopes that AI costs will come down rapidly just like the cost of cloud computing dropped.
DeepSeek AI's Impact
Singh agreed that DeepSeek AI's moment has "changed everyone's mindset about achieving efficiency." That was certainly my impression of the day's proceedings. Numerous panels focused on enterprise AI projects, from the conceptual stage to finally putting them into production. However, panelists also talked about the need to bring the costs of serving AI down dramatically in order to expand access.
One of the reasons many panelists expect more AI infrastructure investment, not less, is because of the proliferation of AI models. A theme throughout the day was that there won't be one AI model for all tasks. "We use a family of models," said Edwards. "There is no such thing as a best model."
The Rise of AI Agents
Such everyday scenarios are "all technologically possible," said Smith, "it's just the pace at which we build it out." The trend to get AI "agents" to more people in an organization is further demanding a cost reduction, said James McNiven, the head of product management for microprocessor maker ARM Holdings, in a chat with Bloomberg's Hyde. "How do we provide access on more and more devices," he posed.
Even the generic foundation models are proliferating at an amazing rate. Amazon AWS has 1,800 different AI models available, Dave Brown, the head of AWS computing and networking, told Bloomberg TV anchor Caroline Hyde. The company is "doing a lot to bring down the cost" of running the models, he said, including developing custom AI chips, such as Trainium.
Economic Uncertainty and AI Investments
Despite the ambitious scenarios, one condition could upend all the use cases and investment plans: the economy. As the conference was drawing to a close Wednesday evening, panelists and guests were checking the after-hours plunge in the stock market. US President Donald Trump, in a Rose Garden ceremony, had just unveiled a global package of tariffs that were larger and far more sweeping than most on Wall Street had anticipated.
Traditional areas of tech investment, such as servers and storage, and not AI, could be the initial victims of any economic contraction, said Bloomberg's Rana. "The other big thing we are focused on is the non-AI tech spending," he said regarding the tariffs. "When we look at the likes of IBM, Accenture, Microsoft, and all the others, when we just put aside AI for a second, that is something that is going to be a struggle going into this earnings season."