Microsoft CEO Satya Nadella touts DeepSeek's open-source AI as "super impressive": "We should take the developments out of China very, very seriously"

The hype building around Chinese AI startup DeepSeek has raised concern among key tech industry stakeholders, and for good reason. On Monday, DeepSeek became the most downloaded free AI app in the US, dethroning OpenAI's ChatGPT. Similarly, Microsoft, Meta, and NVIDIA's stock prices plummeted. The chipmaker lost approximately $500 billion in market valuation, making it the third-most valuable company in the world, behind Microsoft and Apple.

Microsoft CEO Satya Nadella recently weighed in on DeepSeek's ultra-cost-effective AI phenomenon while comparing it to the Jevons paradox economic concept. “Jevons paradox strikes again!” Nadella indicated on X. “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of.”

While speaking to CNBC at the recently concluded World Economic Forum in Davos, Switzerland, the executive indicated:

“To see the DeepSeek new model, it’s super impressive in terms of both how they have really effectively done an open-source model that does this inference-time compute, and is super-compute efficient. We should take the developments out of China very, very seriously.” 

Interestingly, DeepSeek's AI gives proprietary models from sought-after companies, including Meta’s Llama 3.1, OpenAI’s GPT-4o, and Anthropic’s Claude Sonnet 3.5 a run for their money at a fraction of their development cost. The tool outperforms the proprietary AI tools across many benchmarks, surpassing their advanced capabilities and reasoning across math, science, and coding. 

DeepSeek's AI is open-source, allowing anyone to study and replicate its development. Several leaders have claimed the Chinese startup is ironically keeping OpenAI's seemingly abandoned founding mission alive, potentially explaining its immense success and broad adoption. 

However, DeepSeek recently suffered a massive cyberattack, prompting the company to limit new user registrations temporarily. It's unclear how long the registration cap will last, but the company will likely lift it after addressing rising safety and security concerns. OpenAI CEO Sam Altman addressed concerns about the company's preference for closed-source AI models, indicating they provide an easier way to hit the safety threshold. 

Related: Microsoft's struggles with Copilot and AI

This news comes after OpenAI unveiled its $500 billion Stargate project, which will facilitate the construction of sophisticated data centers across the United States to bolster its AI advances. However, DeepSeek's AI approach proves it's possible to scale great feats in the AI landscape without breaking the bank. For context, the AI app is powered by DeepSeek's open-source V3 model, which was trained with approximately $6 million.

In 2023, the Biden-Harris administration imposed new restrictions, preventing the importation of advanced AI chips to China. The administration indicated the efforts weren't designed to stunt China's economy, but to prevent instances where the advanced chips are used to do more harm than good.