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Published 15:02 IST, January 28th 2025

Will DeepSeek's Rise Affect Existing AI Giants? UBS Report Decodes

This means that the rise of smaller and newer players is unlikely to shake the dominance of the bigger players in the industry.

Reported by: Business Desk
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Deepseek AI is here
Deepseek AI is here | Image: Screengrab

Drawing parallels of the AI industry with the mobile phone industry, UBS in a report on Monday said that the introduction of more cost-effective smartphones has led to wider adoption globally, but industry leaders have remained dominant in the high-end segment.

This means that the rise of smaller and newer players is unlikely to shake the dominance of the bigger players in the industry.

The report said that if DeepSeek's model were to prove to be the way to go for the broader AI industry, it is not necessarily a zero-sum game.

The overall market can grow, with potentially lower costs accelerating AI adoption across industries and further improving productivity gains, it added.

According to the report, one possible outcome is that the currently established large language models (LLMs) target the estimated 10-20% premium market of knowledge workers and the open-source approach of DeepSeek is adopted by other segments.

Big Tech's AI Investment

Meta, after the release of DeepSeek's model on Friday said that it plans to spend as much as USD 65 billion this year to expand its AI infrastructure, almost USD 10 billion above market expectations. This suggests capex commitments from leading US tech companies are intact, according to the report.

Additionally, big tech's spending includes development of other models that involve the generation of audio and video, which is out of DeepSeek's scope for current application.

Consumer Sentiment Dips In The US

According to the report, the decline in the consumer sentiments in the US underscores rising concerns about unemployment and inflation, driven by lingering uncertainty around tariffs. However, the labour market remains resilient as evidenced by December's stronger-than-expected employment data, and potential tariffs on individual goods and services may not necessarily have enduring effects on general price levels (inflation).

Updated 15:02 IST, January 28th 2025