Chinese AI Startup DeepSeek Challenges U.S. Tech Giants with Low-Cost, High-Performance Model

Wall Street Breakfast Podcast: China's DeepSeek Outshines

Diversified Energy is nearing a $1.3B deal to acquire Maverick Natural Resources, expanding its operations in Texas and Oklahoma. Listen below or on the go on Apple Podcasts and Spotify Chinese AI lab DeepSeek rattles Silicon Valley. (00:26) Meta offering creators deals to promote Instagram on other apps: report. (01:52) Diversified Energy (OTCQX:DEC) nears $1.3B deal for Permian Basin natural gas player - WSJ. (03:02) Chinese AI startup DeepSeek's large language model is outperforming American rivals and stirring up fears of China overtaking the U.S. in AI. According to benchmarks posted on DeepSeek's website, R1 outperformed models from American competitors like OpenAI, Meta (NASDAQ:META) and Anthropic, who have spent billions of dollars on building their models. DeepSeek, solely funded by Chinese hedge fund High-Flyer, revealed its R1 model on Monday, and detailed in a paper how LLMs can be built on bootstrapped budgets and improved without human supervision. Both DeepSeek and High-Flyer were founded by hedge fund manager Liang Wenfeng and he's the only AI leader invited to a meeting of industry experts with China's second-most powerful leader, Li Qiang. DeepSeek's R1 is open-source, similar to Meta's Llama (NASDAQ:META). Microsoft (NASDAQ:MSFT) CEO Satya Nadella said at the World Economic Forum in Davos, Switzerland, on Wednesday. "We should take the developments out of China very, very seriously." In an interview with CNBC, Alexandr Wang, CEO of Scale AI, described the AI race between the U.S. and China as an "AI war." Wang believes China has substantially more Nvidia (NASDAQ:NVDA) H100 GPUs than people may think. We'll look at how this news is impacting tech stocks in just a few minutes. Meta Platforms (NASDAQ:META) is reportedly offering compensation to creators on Instagram to promote the service on other apps. The report, which cited details of a contract offered to a creator that was seen by CNBC, said Meta is taking advantage of ByteDance's (BDNCE) TikTok app being unavailable from Apple and Google's app stores to promote Instagram. The contract reportedly requires creators to promote Instagram on other short-form video platforms such as Snapchat (SNAP) and Google's YouTube Shorts (GOOG)(GOOGL). Meta, ByteDance, Snap, and Google did not immediately respond to requests for comment by Seeking Alpha. Diversified Energy (OTCQX:DEC) is in advanced talks to buy private-equity-owned Maverick Natural Resources in what would be its largest acquisition ever. The Wall Street Journal reported Sunday that a deal would value Maverick at ~$1.3B, including debt, and could be announced as soon as today, according to the report. Diversified Energy (OTCQX:DEC), which focuses on buying up and operating older, existing natural gas wells, had a market value of more than $800M as of Friday. Maverick, owned by EIG Global Energy partners, has its core operations throughout Texas and Oklahoma. What's Trending on Seeking Alpha: Nasdaq futures plunge 4% as DeepSeek 'panic' slams AI names Trump's tariff threat pays off as Colombia agrees to accept deportees Coinbase CEO says token evaluation gets difficult Perplexity AI alters TikTok merger offer, with possibility of 50% U.S. government stake - reports Catalyst watch: SES AI (SES) and Quantum Computing (QUBT) have a high level of implied volatility based on options trading. The most overbought stocks per their 14-day relative strength index include DXP Enterprises (DXPE), Jabil (JBL), and Cohen Circle Acquisition Corp. (CCIR). The most oversold stocks per their 14-day Relative Strength Index include Electronic Arts (EA), Stardust Power (SDST), and PepGen (PEPG). Now let's take a look at the markets ahead of the opening bell. Dow, S&P and Nasdaq futures are in the red. Crude oil is up 0.3% at $74/barrel. Bitcoin is down 5.6% at $98,000. In the world markets, the FTSE 100 is down 0.1% and the DAX is down 1.3%. The biggest movers for the day premarket: The AI darling, NVIDIA Corporation (NVDA) shares plummeted over 7% after the release of DeepSeek R1, a large language model developed by a Chinese research group, raising concerns about the future of capital spending in artificial intelligence. Alongside NVIDIA, the broader technology sector is experiencing a sell-off with the Magnificent Seven tech stocks all witnessing declines. The sell-off has also extended to other AI-focused companies, including Super Micro Computer, C3.ai, Palantir, and SoundHound AI. On today's economic calendar: 8:30 am Chicago Fed National Activity Index 10:00 am New Home Sales Wall Street Breakfast, Seeking Alpha's flagship daily business news summary, is a one-page summary that gives you a rapid overview of the day's key financial news. It is designed for easy readability on the site or by email (including mobile devices), and is published before 7:30 AM ET every market day. Wall Street Breakfast's readership of over 3.4 million includes many from the investment banking and fund management industries. Sign up here to receive the Wall Street Breakfast in your inbox every business day.Check out our Podcast RSS feed

Low-Cost Chinese AI Model Worries Tech Investors

Listen on the go! A daily podcast of Wall Street Breakfast will be available by 8:00 a.m. on Seeking Alpha, iTunes, Spotify. Survey Monday We're kicking off the year with the first monthly SA Sentiment Survey for January. Stay tuned for the results and don't forget to share your thoughts in the WSB comments section! DeepSeek fears The artificial intelligence boom has pushed companies to spend billions of dollars to maintain their edge. But the global race has taken a surprising turn, with Chinese AI startup DeepSeek's large language model outperforming American rivals and stirring up fears of China overtaking the U.S. in the burgeoning new technology. Backdrop: DeepSeek's latest LLM - called R1 - has outperformed models from established rivals like Microsoft (MSFT)-backed OpenAI, Meta (META) and Anthropic, which have spent billions of dollars to scale up their LLMs. DeepSeek's first open-source LLM - DeepSeek V3, released last December - took less than $6M to build, using Nvidia's (NVDA) H800 chips for training. The R1, built off the V3, is developed to perform complex reasoning and rivals OpenAI's o1. Bigger picture: "The new model is cost-effective and runs on reduced-capability chips," Saxo analysts noted. "The development raises questions about the high valuations of leading AI companies like Nvidia and the investment case for the entire AI supply chain." Also, DeepSeek's LLMs have been developed despite U.S. export controls to limit China's access to the advanced chips needed for AI work. "DeepSeek's recent progress shows that the perceived lead the U.S. once had has narrowed significantly," said Alvin Wang Graylin, a tech expert serving as global VP at Taiwanese firm HTC. On the move: Doubts over U.S. dominance in the AI space, coupled with high stock valuations, dragged the tech-heavy Nasdaq 100 futures (US100:IND) down 4.3% on Monday. Many tech stocks are sliding before the bell, led by AI darling Nvidia's (NVDA) near 12% drop. Other notable decliners: AMD (AMD) -6.5%, Meta (META) -6%, Amazon (AMZN) -5%, Alphabet (GOOGL) (GOOG) -4%, Tesla (TSLA) -4%. Take the WSB survey here. What else is happening... Trump's tariff threat to Colombia pays off; Greenland pursuit gets heated. White House working on plan to save TikTok (BDNCE) involving Oracle. Meta (META) seeks to reassure advertisers worried about free speech shift. Alphabet's (GOOG) Nvidia (NVDA)-like business may be worth billions. Trump's big oil production plans likely to face pushback from Wall Street. Activist Ancora pushes U.S. Steel (X) to drop Nippon deal, oust its CEO. Disinflation in shelter, the biggest CPI component, is gathering speed. Market support: China unveils measures to boost index investments. TRUMP-USD 'hysteria' is more 'evidence of froth in asset markets.'. Early Super Bowl preview: These companies are going for the win. Today's Markets In Asia, Japan -0.9%. Hong Kong +0.7%. China -0.1%. India -1.1%. In Europe, at midday, London -0.2%. Paris -0.9%. Frankfurt -1.1%. Futures at 6:30, Dow -0.9%. S&P -2.4%. Nasdaq -4.2%. Crude -0.3% to $74.45. Gold -0.2% to $2,773.80. Bitcoin -5.3% to $99,124. Ten-year Treasury Yield -1 bp to 4.50%. Today's Economic Calendar 08:30 AM Chicago Fed National Activity Index 10:00 AM New Home Sales 10:30 AM Dallas Fed Manufacturing Survey 11:30 AM Results of $69B, 2-Year Note Auction 01:00 PM Results of $70B, 5-Year Note Auction Companies reporting earnings today " Wall Street Breakfast, Seeking Alpha's flagship daily business news summary, is a one-page summary that gives you a rapid overview of the day's key financial news. It is designed for easy readability on the site or by email (including mobile devices), and is published before 7:30 AM ET every market day. Wall Street Breakfast's readership of over 3.4 million includes many from the investment banking and fund management industries. Sign up here to receive the Wall Street Breakfast in your inbox every business day.Check out our Podcast RSS feed