DeepSeek's Rapid Rise & Implications for the AI Industry

CGTN Europe

Angelo Zino, Senior Vice President and Technology Equity Analyst at CFRA spoke to CGTN Europe on the rise of DeepSeek.

Transcript

00:00Let's talk now to Angelo Zeno, Senior Vice President and Technology Equity Analyst at CFRA Research.

00:07Angelo, good to see you. Well, first of all, look, no one had heard of this crowd, DeepSeek.

00:11Who are they? Why have they been so successful?

00:16Yeah, I mean, listen, essentially DeepSeek is, from what most people would know if they had heard of it,

00:22is they're this kind of China-based app platform and essentially intended to compete with a number of Western counterparts out there,

00:32like in OpenAI out there.

00:36And they've actually been around for a couple of months in terms of the app being active.

00:41But over the last week, they've kind of ramped up a reasoning, you know, greater reasoning capabilities on the platform.

00:49And they've actually kind of, to your point, have kind of boosted themselves to kind of the top of the iOS store for Apple.

00:55But when you kind of think about, you know, what's made them so dangerous, one, it is the cost profile.

01:00And if what they claim is correct in terms of how low the cost point is, that creates a more competitive landscape.

01:09As you would imagine, more and more, you know, competitors enter and flood into the market,

01:14and then it puts some risk out there in terms of the price point and what have you.

01:18So it's a big threat out there for the OpenAIs and anthropics of the world.

01:21And the other thing is, from a performance perspective, and we've been playing around with the app,

01:25it is essentially in par with these Western counterparts out there.

01:30So the lower price point plus kind of the good performance out there is, I think,

01:35what's spooking a lot of investors out there in other kind of AI-oriented names.

01:39Well, you say spooked. I mean, DeepSeek has tanked global tech stocks, hasn't it?

01:43I mean, what are the implications for the broader AI industry?

01:47Is this just a flash in the pan, bad day in the office, or is this terminal?

01:52I think it creates a lot of uncertainty out there, to be honest with you.

01:56I mean, clearly, from a competitive landscape, that's something to think about.

01:59But I think the bigger concern out there in the market, at least today,

02:02is when you kind of look at the best performers out there in the market over the last two years,

02:06it has clearly been some of the high flyers on the semiconductor side of things.

02:10And when you think about, again, how little it costs on the China side of things to develop this model,

02:16I think there is definitely some fear out there about kind of whether or not we need to be spending as much as we are

02:22or the likes of, you know, Ameta as well as Microsoft out there.

02:26I don't think they changed their spending patterns in 2025,

02:29but I think it does create some risk in the out years as we kind of go into 2026 and 2027.

02:35And because of that, I think the multiples start to compress on a lot of these stocks.

02:39And that's why you're seeing a lot of these names getting hit today.

02:42It's because of the uncertainty of those spending levels.

02:45Semiconductors have been in the middle of geopolitical tensions for ages

02:49and in the middle of tariffs and export bans and the rest of it.

02:52So what does this mean for those restrictions?

02:57I mean, it remains to be seen, right?

02:59I mean, when we kind of think about just, you know, what those restrictions currently in place,

03:04plus the increased concerns about privacy from having these models out there.

03:10I mean, when you think about DeepSeek, if you're a U.S. consumer and you're downloading that app like I have,

03:16you're essentially giving your information on China-based servers out there.

03:22We'll see if the U.S. administration decides to kind of further look into it or do anything about that.

03:27There are other apps as well, like RedNote and what have you from the shutdown of TikTok.

03:32So, again, we'll kind of see what happens and what develops here over the coming months and quarters.

03:39But there are risks out there that are intensifying, and the U.S. government is going to have to look into all this.

03:45And we'll kind of see, again, as far as these trade restrictions are concerned,

03:50we think those probably remain in place at this moment, but we'll see what happens.

03:55Angelo, good to see you. Thanks so much for that.

03:57Thanks so much for that. Angelo Zeno, Senior Vice President and Technology Equity Analyst at CFRA Research.

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