For a Slew of AI Chip Companies, DeepSeek is the Opening They’ve Been Waiting For

A Day After Chinese Upstart DeepSeek Wiped More Than $800 Billion from the Market Caps of America’s AI Chip Juggernauts

A day after Chinese upstart DeepSeek wiped more than a staggering $800 billion from the market caps of America’s AI chip juggernauts, you’d think that Andrew Feldman, CEO of next-gen chip company Cerebras, would be locked in a humid war room plotting how to save his company. Instead, he’s celebrating.

We’re Sort of Rejoicing

“We’re sort of rejoicing,” he told Forbes. “These are great days. We can’t answer the phones fast enough right now.”

A Jolt of Interest

It sounds counterintuitive for an AI chip startup, but Feldman says his company, which is expected to go public later this year, has experienced a jolt of interest since DeepSeek has upended the general convention in Silicon Valley that more chips and bigger budgets equal better AI.

Each Time We Made Compute More Performant and Made It Lower Cost, the Market Got Bigger, Not Smaller

“Each time we made compute more performant and made it lower cost, the market got bigger, not smaller,” Feldman said. “Every single time.”

Cerebras Builds Chips Designed Specifically to Make It More Efficient to Use AI

He’s so bullish because Cerebras, currently valued at $4 billion, builds chips designed specifically to make it more efficient to use AI. This process is called “inference” — basically, the act of running an AI model and allowing it to “think” and reason like a human, as opposed to the work of feeding data into the model to teach it how to do that thinking to begin with. Inference is what happens every time you ask ChatGPT to write an email or work through a coding problem.

DeepSeek’s Claims Are Being Hotly Disputed

DeepSeek’s claims — that it trained V3, a 671 billion parameter language model released in late December, in two months for just $5.58 million, orders of magnitudes less than the $100 million OpenAI spent on its (albeit larger) GPT-4 model — are being hotly disputed. Many in the industry believe DeepSeek used more money and compute power than the company let on, with Scale CEO Alexandr Wang claiming the company possessed around 50,000 H100s, state-of-the-art Nvidia chips banned in China.

A Self-Serving One for This Cadre of Companies Vying to Dethrone Nvidia

The reaction is a self-serving one for this cadre of companies vying to dethrone Nvidia, now worth $2.93 trillion even after a 17% market drop on Monday that wiped out nearly $600 billion in value. The dive was “a judgment on the fact that most of Nvidia’s business was tied to these large companies buying lots of racks of GPUs for pre-training” — not for inference, said Liang.

Conclusion

DeepSeek’s success has sparked a shift in the AI industry, and companies like Cerebras are reaping the benefits. With the rise of open-source models and the increasing importance of inference, it’s clear that the future of AI is bright for these smaller chip companies.

FAQs

Q: What is DeepSeek?
A: DeepSeek is a Chinese AI company that has disrupted the industry with its open-source models and claims of training AI models at a fraction of the cost of its competitors.

Q: What is inference in AI?
A: Inference is the process of running an AI model and allowing it to “think” and reason like a human, as opposed to the work of feeding data into the model to teach it how to do that thinking to begin with.

Q: What is Cerebras?
A: Cerebras is a next-gen chip company that builds chips designed specifically to make it more efficient to use AI.

Q: What is Nvidia’s response to DeepSeek’s claims?
A: Nvidia has responded to DeepSeek’s claims by touting its own inference capabilities and stating that inference requires significant numbers of Nvidia GPUs and high-performance networking.