AI Industry STUNNED As Deepseek SHOCKS The Entire Industry (DeepSeek R1)

so if you haven't heard already there is potentially going to be a new AI King and that is of course the Deep seek AI assistant now this thing has absolutely taken over social media and as someone with an AI YouTube channel that explicitly focuses on AI content I actually want to give you guys my perspective on where I think this is headed because a lot of people are missing several points and the story is a little bit deeper than you may think

so of course most people by now would have heard that deep seek the AI assistant has taken over the Internet because allegedly this is a system that is remarkably more efficient than chat gbt and even so probably around 95% cheaper and it got to the point where this app has actually overtaken chat gbt as the most downloaded free app in the iPhone app store now that is a crazy feat as you have to understand chat gbt has had Market dominant ever since the release in November of 2022 so if ever there was a company that managed to overtake them it would definitely be making headlines and certainly that's exactly what has occurred now some people might just think that this isn't just the start and I would agree this is a serious problem for openi and let me explain to you guys why if you guys can take a look at this you can see here that literally in the past day for the first time ever this is the only company to have you know challenged essentially open AI Market dominant in terms of AI Services you

have to understand that this is a tremendous deal because one of the points that many of us made in the AI Community was that whilst other companies sometimes get access to Frontier models and maybe even create them themselves they don't have as much publicity and branded image as chat gbt but currently after today's Fiasco it seems like deep seek is rapidly experiencing user growth and for those of you that think this is just for today in terms of the trends if we look back at the last 7 days we can see that the search volume and of course this is just Google Trends so take this data point with a grain of salt but this is something that overall should show you the scope of how big this situation truly is now this entire situation has been absolutely incredible because if a company can make exactly what you're making for 95% of the cost and it's even faster that is going to have some serious forward-looking implications now some of the open ey employees of course they're not too happy about this for example One open a employee Steven hi highle said Americans sure love giving their data away to the CCP in exchange for free stuff now of course a community note said deep SE can be run locally without an internet connection unlike open a eyes models now that is quite true you can run this model locally although I do doubt that most people will have the knowhow and the will in order to do that and of course in his defense when we do take a look at this tweet that gained 2. 3 million views earlier today it spoke about how a deep seek AI actually collect SS your IP keystroke patterns device info Etc and actually stores it in China where all that data is vulnerable to arbitrary requests from the Chinese state from their own privacy policy we can see that they are collecting data it says automatically collected information we automatically connect information from you when you use the services including internet or other network activity information such as your IP address but I think this is the image that you know tended to scare a lot of people because it says right here the personal information we collect from you may be stored on a server located outside of the country where you live and we store the information we collect in Secure servers located in the People's Republic of China and I don't know about you but I know a lot of people aren't too happy about this now whether or not you think they're storing our data they're doing this with it they're doing that with it we cannot deny that this is a Monumental achievement in the AI industry when you take a look at the benchmarks that the system has been able to achieve it is clear that there is some kind of disruption going on and this innovation we must pay attention to and the craziest thing about all of this is that this cost a fraction of all of these companies spending billions and billions of dollars every single year just to be able to pump out models that are currently on par with other companies for marginal gains so this is a very huge announcement and when we take a cross look at these benchmarks even the distilled models manag to outperform some of the standard models like GPT 40 so many people could realistically even run a 70b model at the level of GPT 40 and all that means is that someone can literally run chat gbt a really smart model on their home device not connected to the internet with pretty low latency and all the privacy in the world if that isn't a very big problem then I don't know what is now it's actually pretty crazy because this is had some incredible effects worldwide like for example Nvidia was down 7 % today guys that is billions and billions of dollars in value for that company the valuation has been slashed by 17% this was a $3 trillion company at one point and now the market is reacting to this news unfavorably I mean it's understandable if you know you can train a model and make a model that is just as effective as a model that you need billions and billions of Dollar on people are like wait a minute aren't we about to move to a new paradigm where maybe we don't need as many gpus and of course if that is the case we know Nvidia is the world's biggest GPU supplier so for me this was a surprising thing but I'm actually going to have a little bit more about this later because I think there are some Market forces that most people aren't thinking about now in addition this actually stunned the industry because it wasn't just Nvidia that was at the Peril we saw that it was a chip blood bath if we look at the heat map for Semiconductor and related devices we can see that AMD down 5% AVG o down when we look at broadcom as well down 15% of course Nvidia at the time of making the screenshot it was down 14% and other

semiconductor and related devices were also down I mean I got to be honest guys this is the kind of I wouldn't say black SP event but the kind of announcement that definitely the market didn't take a liking to being able to wipe billions and trillions of dollars off an entire Market is really significant this is the news that impacted the entire industry and for the first time that probably isn't clickbait now we have to understand what other individuals within the AI space were saying someone that I'm actually going to give credit to here is Gary Marcus now this is quite the controversial figure in the AI Community if you aren't familiar with Gary Marcus he is essentially someone that the AI people either love or either hate and I'm 50/50 on this guy because he makes Incredible points about AI companies but sometimes the way he does them aren't in the best frame and it can seem like he is hating a little bit but in this blog post that he actually shows he actually called this a year early and he's been early when it comes to predicting a variety of different things within the AI industry one year ago today he actually called it he said open AI actually lacks profits and emote the systems that they have built are hugely expensive to operate because they require massive amounts of compute and at the same time the general principles for building them have become fairly well known in the industry large language models such as chat gbt May quickly become Commodities which means we can expect price Wars and profits may continue to be elusive or even modest at least and basically what he's saying here is that look the secret of chat gbt is out we have tons of Open Source models so what is the defining thing that's going to keep open AI afloat and all of these other American AI companies if someone can go on the App Store download something that is faster cheaper and better I mean what kind of chance do they have now you can see right here that he talks about they require massive amounts of compute for training estimated in the tens or hundreds of millions of dollars for GPT 4 and that this is going to be a problem and of course there are going to be price Wars and profits elusive at best now he wasn't the only one that had something to say the AI

Cesar David saaks says that deep seek r one shows that the AI race will be very competitive and that President Trump was right to resend the Biden EO which hamstrung American companies without asking whether China would do the same which obviously they wouldn't I'm confident in the us but we can't be complacent now he's basically stating here that look we need to ensure that we win this race because if we're not then of course China can race ahead and the air landscape is becoming increasingly competitive with China's rapid advancements exemplified by Deep sear one he's basically supporting the decision to resend Biden's executive order implying that it imposed unilateral constraints on us AI companies without guaranteeing reciprocal actions from China and he basically just says look we basically need to lock in here cuz if we don't it's going to be a terrible scenario now another thing the president of the United States was actually surprised he said the release of deep seek AI from a Chinese company should be a wakeup call for our industries that we should be laser focused on competing to win we have the best scientist in the world and this is very unusual we always have the ideas and we are always first so what on Earth has happened this time and I think the us maybe they just got too complacent the Dynamics in these two different countries are remarkably different in China you have people that are willing to work incredibly hard not that than working incredibly hard in Silicon Valley but those salaries are definitely a lot higher and those jobs definitely seem a lot more comfortable and this is something that someone actually did speak about a few days ago I mean it was leaked with regards to meta I'm not sure if I have the information but it was pretty crazy they were basically saying that look these AI companies are floundering at the moment they're currently worried because this has just thrown a complete spanner in the works but take a listen to what Trump said because what he said is important I mean it's the president last week I signed an order revoking Joe Biden's destructive artificial intelligence regulations so that AI companies can once again focus on being the best not just being the most woken today and over the last couple of days I've been reading about uh China and some of the companies in China One in particular coming up with a faster method of AI and much less expensive method and that's it's good because you don't have to spend this much money I view that as a positive as an asset so uh I really think if it's fact and if it's true and nobody really knows if it is but I view that as a positive because you'll be doing that too so you won't be spending as much and you'll get the same result hopefully the release of deep seek AI from a Chinese company should be a wakeup call for our industries that we need to be laser focused on competing to win because we have the greatest scientists in the world even Chinese leadership told me that they said you have the most brilliant scientists in the world in Seattle and various places but uh Silicon Valley they said there's nobody like those people this is very unusual when you hear a deep seek when you hear somebody come up with something we always have the ideas we're always first so I would say that's a positive that could be very much a positive development so instead of spending billions and billions you'll spend less and you'll come up with hopefully the same solution under the Trump Administration we're going to unleash our tech companies and we're going to dominate the future like never now the crazy thing about this is that Eric Schmidt a former Google CEO actually confirmed and he actually said a few months ago that is actually critical that we win this race so regardless whether or not you think about AI from open AI or deep seek I think you guys have to understand that the reason that Eric Schmidt actually said that it's critical that we win this race and this is why I think a lot of people are not realizing this is not the situation of okay China just created another chat model that is better than opening eyes they've actually done something really incredible in terms of like this is a wakeup call for the United States because they initially thought that they were you know essentially maybe 6 to 12 months ahead times they were thinking they were 2 years ahead but if they are on par with where they currently are that means the United States needs to speed up their production in terms of the AI that they're building because you have to understand AGI or ASI artificial super intelligence is absolutely gamechanging that is going to be the number one military asset in future societies and whichever Society okay in terms of you know the country or the state whichever you are you need and I canot you know State how important this is in terms of military defenses ASI is going to be the ultimate thing that these countries are going to be using for their National Defense and this is why he said that it's critical that we win this race and most people don't realize that now we are literally racing towards superintelligence and AGI I've

done this for 50 years I've never seen Innovation at this scale of this literally remarkable human achievement of intelligence and the things that we can do and the advances in science and on on there's a point at which maybe in the next year or two where the systems can begin to do their own research they're called AI scientists as opposed to human scientists so you go from having a thousand human scientists to a million AI scientists I think that increases the slope when you're moving at this space it's very hard for your competitors to catch up that's the race it is crucial that America wins this race globally and in particular ahead of China and so this is something that I think we need to pay attention to as a potential side effect of the current race I think this year is probably going to move the quickest as companies are going to start deploying more rapidly and iterating even more efficiently than they have before now one of the things that I did want to know was is this actually real well I was doing some digging and I came across this tweet right here it speaks about how they actually replicated the Deep seek r10 and deep seek R1 training on a 7B model with only 8,000 examples and they said the results are surprisingly strong the reason I'm actually talking about this research is because it seems like the Deep seek method was a lot more efficient than open AI method and if that is the case they should be able to use similar methods on smaller models and that's essentially what they did they used Quin 2. 5 math as a base model and then they perform some reinforcement learning on it directly no reward model no fine tuning just 8K math examples for verification and achieves a pass at 1 33% on a really decent Benchmark 62% and then 77. 2% at performing the other model so they're basically stating that look this is something that actually works and the self-reflection thing that you know we spoke about in the Deep seek paper it actually emerges so when we actually take a look at these results here it may look a little bit confusing but basically they're stating that look the tech technique that deep seek have employed here this is something that does work with these models so it's pretty crazy now another thing that I think most people did Miss I mentioned this in a previous video but the fact that deep seek was just a side project for a Quant company where they essentially just had some spare gpus and I think this is a giant wakeup call if China can do something like this with spare gpus I mean it's going to be a real shock to the industry now the crazy

thing about all of this is that the thing is that it's still not over they are not done they actually recently dropped Janos and this is essentially a multimodal model that produces images in stunning resolution at a very cheap rate now the thing here is that you know I think these AI companies are definitely concerned the AI industry is one that is Rife with Innovation that is so crazy that you almost can't keep up with it and trust me I'm coming from a place where sometimes I just think I have eight video topic that I need to upload today and it is almost impossible for people to keep up with AI news let alone myself and this is something that is going to be more and more prevalent as time goes on and I want to talk about you know how there are similar things going on in the electric vehicle Market many people may know that electric vehicles are in a situation where people are starting to realize that wait a minute Chinese cars are you know costing $220,000 and they are remarkable in terms of the technology the usability the efficiency all of these gizmos and gadgets that we get but over in the EU and over in the west we have to pay a huge markup for these cars due to the Terrace and it's like what happens when the software is going to be at a stage where it's just a commodity due to China ramping those costs down you have to remember the user is always going to be doing what's best for themselves and it's going to be increasingly hard to prevent you to be able to download Open Source software especially if it's remarkably more effective than the current software that you're using now of course Nvidia the big dog the big players in the AI industry have officially spoken they've said that deep seek is an excellent AI advancement and a perfect example of test time scaling deep seeks work illustrates how new models can be created ated using that technique leveraging widely available models and compute that is fully export control compliant you have to understand that you know for NVIDIA I still don't think this is a bearish piece of information you have to understand that there are rumors which I probably will get into another video that they actually have significantly more gpus that they are letting on and I think if that information does come to surface then the market May adjust its expectations on what they think about these models but overall it goes to show that Nvidia has been paying attention and they show that look Nvidia isn't backing down they are fully invested in the space and they're like look this is of course Innovation and Innovation is great and we're going to continue selling these gpus and the craziest thing about all of this is that labs are starting to freak out actually saw this post from meta now meta is a company that heavily invested in Ai and they've kind of reaped the rewards their stock has been soaring through the roof but the problem is that most people don't realize that deep seek may have just stolen meta's entire pie see most people don't realize that there is this entire open source industry if you're watching this and you're just a normal person who's interested in the a industry meta has a huge Hold On the Open Source industry because they release open source models all the time they pretty small and very Nifty to run on a variety of different devices but you have to understand meta is a billion doll company you can't have Chinese companies making things super cheap and super efficient for a fraction of the cost that's going to eat into their bottom line and meta was hoping that you know the Llama 4 which is their next iteration of their open source model was going to be the thing that you know just crushes the open source industry and they are basically the industry leaders and they can make a ton of money from Partnerships and other collaborations however this post from a few days ago which I didn't really want to comment on because it was pure speculation and I will show you that it actually is true it talks about how you know basically deep seek V 3 rendered llama 4 already behind in benchmarks and this was basically deep seeks prior model so this wasn't even the R1 model that everyone is freaking out about now and you can see right here it says adding insult to injury was the fact that it managed to put llama four behind the benchmarks and an unknown Chinese company with a $5. 5 million training budget and it says the engineers are moving frantically to dissect deep seek and copy anything and everything we can from it and I'm not even exaggerating and it says that management is worried about justifying the massive cost of a generative AI org how would they face leadership when every single leader of gen AI org is making more than what it costs to train deep seek entirely and we have dozens of such leaders now most people don't realize just how much people in the AI industry are getting paid now honestly I think it's worth it because these people are ridiculously smart and AI Talent is truly scarce and these companies have billions of dollars so they're not going to skimp out on salaries when they are looking to ensure they have the brightest Minds for you know essentially securing the AI future and the crazy thing now is that like they're like wait a minute we pay 12 people maybe $50 million a year collectively and now we look at that as what on Earth are we doing when we can literally just get a model done for a fraction of the cost of that training run like what on Earth is are we doing here so this is something that is you know freaking them out and the crazy thing about this is that they didn't even realize that deep seek R1 was even coming and deep seek R1 basically made things even scarier says I can't reveal confidential information but it should be soon public info anyways and you can see right here that this article that has come out today in fact that's the wrong slide let me show you the real slide you see right here that it says meta is reportedly scrambling War rooms of Engineers to figure out how deep seeks AI is beating everyone at a fraction of the price so this is something that I think is a serious issue you know you can see Mark zabz has a Stern face here of course that's probably what he looks like right now but you have to understand like meta is a billion dollar company they staked their entire future on this now meta aren't completely screwed because they do have the distribution but I personally think the entire AI industry is about to change in a way that you don't think and I'm going to get to that at the last point of the video because I think most people are going to miss what this changes for the entire AI industry now the crazy thing about this is that Nvidia have actually spoken they've said that deep seek is an excellent AI advancement and a perfect example of test time scaling that's apparently what an Nvidia spokesperson told cnnb on Monday deep seeks work illustrates how new models can be created using that technique leveraging widely available models and compute that is fully export control compliant so basically what they're stating here is that this is good for them because they realize that look it might be more efficient but you still need more compute now most people don't realize that what Nvidia is saying is actually the truth you see remember how I said that you know they made deep seek incredibly good but they did it at a fraction of the cost and because people were like wait a minute we don't need these stocks anymore why are we buying so many chips if you can achieve it for like you know a fifth of that cost but here's the thing okay now I'm going to show you guys a tweet from Andre karpathy this is someone who is incredibly smart and you know was one of the original people who worked on the chat GPT team in terms of like the gp22 team those early research papers he was a key figure and he said okay so here this a statement it's really important he said I don't have too much to add on top of this earlier post on V3 and I think it applies to R12 which is more on the recent thinking equivalent but I will say that deep learning has a legendary ravenous appetite for compute like no other algorithm that has ever been developed in AI you may not always be utilizing it fully but I would never bet against compute as the upper Bound for achievable intelligence in the long run not just for an final you know individual training run but for the entire Innovation experimentation engine that silently underlines all the algorithmic Innovations basically he's stating that look whilst yes there is crazy that they managed to do this on a Sho string budget I would never bet against the fact that you're still going to need loads and loads of comput if you truly want to achieve artificial super intelligence there's simply probably no way around this and the crazy thing about this is that I think okay when we actually look at what the researchers are saying is that maybe this situation might be overblown to an extent that most people simply haven't priced in yet now of course there was this statement and I was like okay things might be getting out of hand they said you know unusual worlds this is someone that tracks market events and they said that deep seek could be an extinction level event for some vental Capital firms per axios now that's a crazy statement an extinction level event but I think what they're stating is that maybe these guys who are investing in AI companies invested in the wrong ones you see you have two kind of AI companies that you can invest in companies that are on the llm layer which is essentially you're building the actual software behind the you know systems like chat GPT so you're you know spending millions of dollars and you are putting all of that Capital into the training runs and it's super expensive and you essentially just hoping for return sometime in the near future now if you were investor that did that honestly you going to be in some serious trouble once those cost start to come down because those companies are going to struggle to make money but here's the thing about this I think the companies that are on the you know rapper level so companies that are just interacting with the AI systems maybe like character AI or other software verticals on top of the AI I think those ones are going to come out on top because their valuations are simply based on how useful that technology is to the user you can see it says right here analysts are now asking if multi-billion dollar Capital investments from companies like Microsoft Google and meta for NVIDIA based AI infrastructure are being wasted when the same results can be achieved more cheaply and earlier this month Microsoft said it's spending $80 billion on AI infrastructure in 2025 alone while Mark zukerberg said last week that the social media company had planned to invest between 60 to 65 billion in capital expenditures in 2025 as a part of its AI strategy so this is something that could completely change the landscape in terms of AI investment because right now in the labs they've probably put a pause on a lot of these developments you know because of thinking wait a minute before we spent all of these billions of dollars let's actually probably you know pump the brakes a little bit and see if we can actually figure out if what they're saying is true if these benchmarks are really true if they did manage to do this and honestly I'm going to continue to do some digging and I'll be covering the entire thing on my channel if you guys did enjoy this video I post videos every single day and hopefully you guys understood the situation a little bit more and you understand all the inner workings behind the situation I personally find this to be a super insightful moment for the AI Community I personally think the situation is a little bit overblown in terms of the stocks declining but I do think that it is going to change the way companies think about their AI implementation I think right now companies are going to be rallying to get multiple different products shipped out as quickly as possible as that might be the final Moe that these companies do have so if you are a consumer you can probably expect within the next 2 to 3 years millions and billions of different AI products held at you but it's just going to make your life easier because all of these products are going to be relatively cheap considering many companies are going to be basically competing on price and of course distribution so with that being said if you guys have enjoyed the video I will see you in the next one