‘Game on’: Tech execs say DeepSeek ramps up China-U.S. competition but won’t hurt OpenAI
Tech bosses largely agree the risk DeepSeek poses to OpenAI remains limited for now.
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The technological advances that Chinese artificial intelligence lab DeepSeek have displayed show the game is on when it comes to U.S.-Sino competition on AI, top tech executives told CNBC.
In a series of interviews at France’s Artificial Intelligence Action Summit, leaders of several major tech companies told CNBC that the emergence of DeepSeek demonstrates that China can’t be counted out as a serious player when it comes to AI innovation.
Last month, DeepSeek shocked global markets with a technical paper saying that one of its new AI models was created with a total training cost of less than $6 million — far less than the billions upon billions of dollars being spent by Big Tech players and Western AI labs such as OpenAI and Anthropic.
Chris Lehane, chief global affairs officer at OpenAI, told CNBC that DeepSeek’s advanced, low-cost model confirms there is a “very real competition between U.S.-led, small D democratic AI and CCP [Chinese Communist Party] China-led autocratic, authoritarian AI.”
Many critics of DeepSeek have pointed to apparent censorship by the model when it comes to sensitive topics. For example, when asked about the 1989 Tiananmen Square massacre, DeepSeek’s AI assistant app responds with: “Sorry, that’s beyond my current scope. Let’s talk about something else.”
“There’s two countries in the world that can build this at scale,” Lehane told CNBC’s Arjun Kharpal on the sidelines of the Paris AI summit Monday. “Imagine if there were only two countries in the world that could build electricity at scale. That’s sort of how you have to think about it.”
“For us, what DeepSeek really reinforces and reaffirms is that there is this very real competition with very real stakes,” Lehane added.
Still, tech bosses largely agreed that even though DeepSeek’s breakthrough shows China being further along in the global AI race than previously thought, the threat it poses to OpenAI remains limited for now.
‘The game is on’
DeepSeek says that its new R1 model, an open-source reasoning model, was able to rival the performance of OpenAI’s own similar o1 model — only using a cheaper, less energy-intensive process.
That led experts to question the prevailing wisdom in the West of the last several years, which is that China is behind the U.S. on AI development because of export restrictions that make it harder for firms in the country to get their hands on more advanced Nvidia graphics processing units, or GPUs.
GPUs are necessary for training and running AI applications because they excel at parallel processing, meaning they can perform multiple calculations simultaneously.
Reid Hoffman, a co-founder of LinkedIn and partner at the venture capital firm Greylock Partners, told CNBC Monday that DeepSeek’s new model is “a big deal in showing that the game is on.”
“The competition is afoot with China,” Hoffman said, adding that DeepSeek’s R1 is “a credible, actionable model.”
Abishur Prakash, founder of strategic advisory firm The Geopolitical Business, told CNBC that DeepSeek shows the West’s understanding of China remains limited.
“America’s assumed place as the technological captain of the world is no longer the acceptable belief,” Prakash told CNBC in a phone interview.
“That is the new status quo now, that the space between the U.S. and China has narrowed almost overnight — but it hasn’t narrowed overnight, it’s been years of progress,” Prakash said.
“If there’s one takeaway for the West, it’s that their understanding of China is incredibly limited — and we don’t know what’s coming next,” he added.
No meaningful threat to U.S. AI — yet
Still, leading AI execs aren’t convinced that DeepSeek poses any sort of meaningful risks to the businesses of AI labs like OpenAI and Anthropic just yet.
While experts on the whole agree DeepSeek’s AI advances have been impressive, doubts have been raised about the startup’s claims about cost.
A report from semiconductor research firm SemiAnalysis last month estimated that DeepSeek’s hardware expenditure is “well higher” than $500 million over the company’s history. DeepSeek was not immediately available for comment when contacted by CNBC.
The report found that DeepSeek’s research and development costs and expenses related to ownership are significant and that generating “synthetic data” for the model to train on would require “considerable amount of compute.”
Some technologists believe that DeepSeek may have been able to achieve such a high level of performance by training its models on larger U.S. AI systems.
This technique, known as “distillation,” involves having more powerful AI models evaluate the quality of answers being generated by a newer model.
It’s a claim that OpenAI itself has alluded to, telling CNBC in a statement last month that it’s reviewing reports that DeepSeek may have “inappropriately” used output data from its models to develop its AI model, a method referred to as “distillation.”
“Most of the market fear around [DeepSeek] is in fact misplaced,” Hoffman told CNBC. “It still requires large models — it was distilled from large models.”
“I think the short answer everyone should take is: game on — but large models still really matter,” he added.
Victor Riparbelli, CEO of AI video platform Synthesia, told CNBC that although DeepSeek challenged the “paradigm that brute force scaling is the only way to kind of build better and better models,” the idea that companies are going to suddenly shift significant amounts of their AI workloads is misguided.
“I still think that when you look at users of these technologies, all the workflows, I think when we look back in three months’ time, I think 0.01% of those is going to be moved to Deepseek from OpenAI and Anthropic,” Riparbelli said.
Meredith Whitaker, president of the Signal Foundation, said DeepSeek’s development doesn’t move the needle much for the industry as market momentum is still broadly in favor of larger AI models. The Signal Foundation is a nonprofit that supports the encrypted messaging app Signal.
“This is not something that’s going to disrupt the concentration of power or the geopolitical balance at this stage,” Whitaker told CNBC. “I think we have to keep our eye on the ball there and recognize that it’s really this ‘bigger is better’ paradigm that is not reduced through efficiency gains historically, that is driving this concentration.”
Technology
Rippling valued at $16.8 billion as HR software startup raises $450 million, says IPO not imminent
From left, Parker Conrad, co-founder and CEO of Rippling, and Kleiner Perkins investor Ilya Fushman speak at the venture firm’s Fellows Founders Summit in San Francisco in September 2022.
Rippling
Human resources software startup Rippling said Friday that its valuation has swelled to $16.8 billion in its latest fundraising round.
The company raised $450 million in the round, and has committed to buying an additional $200 million worth of shares from current and previous employees. The company’s valuation is up from $13.5 billion in a round a year ago.
Rippling said there was no lead investor. Baillie Gifford, Elad Gil, Goldman Sachs Growth and others participated in the round, according to a statement from the San Francisco-based company.
With the tech IPO market mostly dormant over the past three-plus years, and President Donald Trump’s new tariffs on imports leading several companies to delay planned offerings, the most high-profile late-stage tech startups continue to tap private markets for growth capital. Rippling co-founder and CEO Parker Conrad told CNBC in an interview the the company isn’t planning for an IPO in the near future.
Conrad also highlighted a change that’s taken place in public markets in recent years, since inflation began soaring in late 2021, followed by higher interest rates. With concerns about the economy swirling, many tech companies downsized and took other steps toward generating and preserving cash.
“It does look a lot like, in order to be successful in the public markets, your growth rates have to come down so that you can be profitable,” said Conrad, who avoided enacting layoffs. “And so for us, that sort of pushes things out until the company looks profitable and probably slower growing, right?”
At Rippling, annual revenue growth is well over 30%, Conrad said, though he didn’t provide an updated sales figure. The information reported last year that Rippling doubled annual recurring revenue to over $350 million by the end of 2023 from a year prior.
Given the pace of expansion, Conrad said he isn’t fixated on profits at the moment at Rippling, which ranked 14th on CNBC’s Disruptor 50 list.
Rippling offers payroll services, device management and corporate credit cards, among other products. Competitors include ADP, Paychex, Paycom Software and Paylocity.
There’s also privately held Deel, which Rippling sued in March for allegedly deploying a spy who collected confidential information. Conrad suggested that the publicity surrounding the case may be boosting business.
“I think it’s too early to say, looking at the data, how all of this is going to evolve from a market perspective, but certainly we see some companies that have said, ‘Hey, we’re talking to Rippling because of this,'” Conrad said.
WATCH: The IPO market is likely to pick up near Labor Day, says FirstMark’s Rick Heitzmann
People walk past a neon sign advertising a Bitcoin and Ethereum crypto currency exchange in Warsaw, Poland on 19 May, 2024.
Jaap Arriens | Nurphoto | Getty Images
Cryptocurrencies extended their rally to end the week, with bitcoin holding steady above the $100,000 level while ether rallied to its best week since 2021.
The price of bitcoin was higher by 2% at $103,249.99 on Friday, according to Coin Metrics. Earlier, it rose as high as $104,324.65, its highest level since Jan. 31. For the week, bitcoin is up more than 6% and on pace for its fourth positive week in a row – and first four-week win streak since November.
“This move above $100,000 should be viewed as more than mere euphoria, but rather as evidence of a flows-driven shift,” said Gadi Chait, head of investment at bitcoin-native Xapo Bank. “Whales have been accumulating on-chain, ETF demand continues to set new records, and investors seek ‘neutral’ assets amid a tariff-shadowed macro environment. Meanwhile, the announcement of a U.S.–U.K. ‘mini-deal’ and hints of tariff relief with China have reduced overall risk aversion, lifting equities, oil, and, notably, Bitcoin.”
The risk-on sentiment bled into altcoins, or cryptocurrencies that aren’t bitcoin, most of which have struggled to keep pace with bitcoin’s gains this year. Ether, one of the biggest stragglers, jumped 10%, bringing its two-day gain up to 29%. A 6% increase in the token tied to Solana brought its two-day gain to 16%.
This week the Ethereum network also completed its latest technology upgrade, dubbed Pectra, which enables lower network fees, streamlined ether staking and support for smart wallets.
Ether heads for its best week since 2021
Ether is up 25% week to date and on pace for its best week since May 2021. The Solana token has added 14.3% this week, which is on track to be its best week since January.
Year to date, however, ether and other major altcoins – with the exception of XRP – are still deep in the red compared to bitcoin. While the flagship crypto is up 10%, ether and the Solana token are down 31% and 12%, respectively.
Bitcoin’s market structure changed after the introduction of spot bitcoin ETFs in 2024, with demand now coming from retirement accounts, macro funds, and corporate bonds such as Strategy. By contrast, altcoins still rely on crypto-native, risk-on capital, which hasn’t shown significant growth alongside the greater tech sector due to the current interest rate environment, according to Eric Chen, Co-Founder of Injective.
Bitcoin is likely to keep outperforming until broader capital flows into altcoins, he added, given their steady supply and lack of a structural buyer base, which are likely to take prices lower until they attract speculative interest.
“For us, there remains one singular strategy for crypto investors: stick to BTC until risk on headwinds dissipate,” Wolfe Research analyst Read Harvey said in a note this week. “The coin is one of just two in our basket positive on the year and it continues to dominate the rest of the space on a relative basis. The question now shifts towards if it can maintain recent outperformance vs. equities, or if Gold was right all along.”
—CNBC’s Nick Wells contributed reporting
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