The bottom line regarding the AI market panic

This summarizes, very well, a lot of things.

Now that a company has figured out a way to produce an AI app that’s just as effective at producing satisfactory output as the big American companies, at a sliver of the cost, a $500 billion data center facility in the desert suddenly seems like an offensive boondoggle…

It’s worth underlining a couple things here. First, generative AI long seemed destined to become a commodity; that ChatGPT can be so suddenly supplanted with a big news cycle about a competitor, and one that’s open source no less, suggests that this moment may have arrived faster than some anticipated. OpenAI is currently selling its most advanced model for $200 a month; if DeepSeek’s cost savings carry over on other models, and you can train an equally powerful model at 1/50th of the cost, it’s hard to imagine many folks paying such rates for long, or for this to ever be a significant revenue stream for the major AI companies. Since DeepSeek is open source, it’s only a matter of time before other AI companies release cheap and efficient versions of AI that’s good enough for most consumers, too, theoretically giving rise to a glut of cheap and plentiful AI—and boxing out those who have counted on charging for such services.

Second, this recent semi-hysterical build out of energy infrastructure for AI will also likely soon halt; there will be no need to open any additional Three Mile Island nuclear plants for AI capacity, if good-enough AI can be trained more efficiently. This too, to me, seemed likely to happen as generative AI was commoditized, since it was always somewhat absurd to have five different giant tech companies using insane amounts of resources to train basically the same models to build basically the same products.

What we’re seeing today can also be seen as, maybe, the beginning of the deflating of the AI bubble, which I have long thought to only be a matter of time, given all of the above, and the relative unprofitability of most of the industry. - Blood in the Machine