How big tech is quietly recalibrating itself around the DeepSeek threat
Silicon Valley owes its longevity to its ability to pivot and China’s new AI start-up could set it moving in a new direction.
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Mark Zuckerberg says this is going to be a big year for his tech industry. He’s not wrong.
Despite the arrival of a brazen and extreme low-cost outsider to the AI race this week, the Facebook founder will throw up to $US65bn ($104bn) this coming year to dominate the new technology.
He’s not alone. The AI arms race is rushing ahead at full speed. Microsoft boss Satya Nadella and wants to spend an eye-watering $US80bn this year – much of this on building out AI infrastructure like data centres.
For context, Australia’s biggest single private sector project, the Gorgon LNG development, cost $US55bn and even that was spread over nearly a decade of work.
Zuckerberg on Thursday boasted to analysts his 2 gigawatt data centre, to be built in Louisiana, would be “so big that it’ll cover a significant part of Manhattan”.
Only history will tell who’s going to be right on AI as China’s DeepSeek model fundamentally challenges the dominant thinking around the technology; that is, the more you spend, the greater the moat you build to maintain dominance.
By switching parts of its “intelligence” on and off, DeepSeek has been able to deliver powerful AI while consuming a fraction of the computing horsepower. It’s little wonder this rattled the infrastructure players, including data centre backers and chipmaker Nvidia.
But the arrival of DeepSeek this week has already started recalibration. And that’s long been the key to survival in big tech.
In recent years, we’ve seen Zuckerberg shift from the embracing the metaverse (the namesake of his company) to AI. We’ve seen him and others swing wildly between financial conservatism involving slashing headcount, to spending up big. At the same time, there’s a not-so-subtle recalibration, as Silicon Valley rushes to embrace Donald Trump’s White House.
Zuckerberg says there’s a number of “novel things that (DeepSeek) did that I think we’re still digesting”.
“There are a number of things that they have advances that we will hope to implement in our systems,” he says.
“And that’s part of the nature of how this works, whether it’s a Chinese competitor or not. I kind of expect that every new company that has an advance event, that has a launch, is going to have some new advances that the rest of the field learns from and that’s sort of how the technology industry goes.”
Nor is all AI going to be the same. There are going to be different applications for a myriad of uses. Already AI is fragmenting into applications for search, driving and business processes.
“People are going to get to choose how their AI works and what it looks like for them,” Zuckerberg says.
In a separate briefing, Nadella spoke of lowering the cost of delivering AI. He says there’s two times the efficiency gains he is seeing in terms of price and performance for every new generation of hardware that comes through. Meanwhile continuous software improvements can deliver efficiency gains of about 10 times. Microsoft’s cloud business, Azure, is the engine for its AI offering that is built on OpenAI’s models.
Meta, meanwhile, is running several AI bets at once, including its flagship open-source model called Llama that can be embedded into other applications. It also runs AI chat and search functions for its own suite of social media products, including Facebook and Instagram.
Zuckerberg believes it’s way too early to pull back on the heavy investment in AI infrastructure just now. He’s right. It’s been a week since DeepSeek was launched and many are looking at how it fits into the sweep of existing AI products – including OpenAI’s tech used by Microsoft.
That is going to be a strategic advantage over time, he reasons, and this continues to shape the thinking inside Silicon Valley.
“I would bet that the ability to build out that kind of infrastructure is going to be a major advantage for both the quality of the service and being able to serve the scale that we want to,” Zuckerberg says.
He drew a clear line between the need for computing power and end user numbers.
Unleashing an AI model into applications, like the ones Meta is building, they have ready made audiences running into the billions of people, he says. This is different from training a stand-alone AI model from the ground up.
“At some level, it’s going to be expensive for us to serve all of these people, because we were serving a lot of people,” the Meta boss says.
On the political landscape, tech has made the biggest pivot. Amid threats of heavy regulation and even being broken up under Biden, Silicon Valley has embraced Donald Trump’s administration.
The likes of Zuckerberg, Apple’s Tim Cook, Open AI’s Sam Altman and of course Elon Musk, were all at the centre of power at last week’s inauguration.
What’s good for Trump is also good for tech, they reason. Musk, who was Trump’s single biggest donor, has his own reasons.
“We now have a US administration that is proud of our leading companies, prioritises American technology winning, and that will defend our values and interests abroad,” Zuckerberg tells investors.
In recent months Facebook has scrapped third-party fact checking that drew the ire of Trump. On the investor call he spoke of moving Facebook to a community notes-style crowd sourced fact-checking system as used by Musk’s social media platform, X.
There’s plenty at stake. Big tech – particularly Zuckerberg – has a history of clashing with Trump and now political protection is the name of the game.
The tariff threat could impact how Apple makes its iPhones in China. European regulation and threats of legal action are rising, while changes to immigration rules can undermine access to labour.
This year tech has the most to gain, but equally the most to lose.
eric.johnston@news.com.au
Originally published as How big tech is quietly recalibrating itself around the DeepSeek threat
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