The week began with significant tech stock declines after the world became aware of the Chinese chatbot R1 from DeepSeek. Nvidia experienced a $600 billion drop in market value when R1 was launched, but has since recovered some of the losses. However, questions have surfaced about how DeepSeek obtained access to chips, the accuracy of the company’s claimed low development costs, and the use of personal data by the AI robot.
It is clear that American tech giants increasingly need to justify their development costs to investors and address the impact of challengers like DeepSeek. As Apple, Microsoft, and Meta opened their books this week, the focus unsurprisingly turned to AI and DeepSeek.
Meta: Too Early to Tell
Meta released fourth-quarter numbers on Wednesday, with CEO Mark Zuckerberg stating that they are still evaluating DeepSeek’s progress. Zuckerberg mentioned during the conference call, “It is probably too early to have a strong opinion on what this means for infrastructure development and capital investments.” He also expressed hope that Meta could incorporate some of DeepSeek’s advancements into their own AI projects. Meta forecasts costs between $114 billion and $119 billion for 2025, following Zuckerberg’s statement that AI investments will account for $60-65 billion next year. He emphasized that significant investments will be a strategic advantage over time.
Microsoft: “It Will Have Broad Use”
Microsoft’s AI business has an annual revenue rate of $13 billion, with plans to spend $80 billion on AI in the current fiscal year ending in June. As one of Open AI’s major investors, CEO Satya Nadella mentioned DeepSeek multiple times during the conference call. He suggested that software companies might develop AI at a lower cost with DeepSeek’s help, citing the company’s contributions to innovation. “All of this is becoming a commodity and will have broad use,” stated Satya Nadella. The report was weaker than expected, particularly in areas unrelated to AI.
Apple Continues with Hybrid Model
Apple has faced criticism for not investing in AI as extensively as other Mag7 companies. While the company delivered better-than-expected numbers, iPhone sales decreased by nearly 1% to $69.1 billion during the period, with a significant 11.1% drop in China. However, like other tech giants, DeepSeek was a focal point. When asked about DeepSeek’s impact on margins, CEO Tim Cook mentioned that he generally views innovation driving efficiency as positive. He highlighted Apple’s hardware-software integration as advantageous. “From a CapEx perspective, we have always had a cautious and thoughtful approach to our investments. We continue to leverage a hybrid model, which I believe will continue to serve us well,” said Tim Cook.