Days after Silicon Valley was left reeling after DeepSeek’s budget AI revelations, tech CEOs have defended hefty spending on AI development.
The Chinese firm triggered a tumbling in tech stocks on Monday (27 January) as it claimed that its AI models, including its flagship R1 reasoning model, were developed for a fraction of the cost of Western models while, according to the company, displaying comparable performance.
The development left investors questioning the levels of spending needed for AI development and the value of tech firms in the US markets plummeted during early trading.
The heaviest hit was those at the forefront of AI development, including the chip-manufacturing giant NVIDIA. Amid fears that DeepSeek’s AI models would crush demand for GPUs, the firm recorded the greatest one-day loss in US stock market history as its value shed close to $600m.
Microsoft, Meta defend spending
During earnings calls on Wednesday, executives reiterated the need for investment in building huge computer networks to meet corporate needs.
Mark Zuckerberg, CEO of Meta, promised “hundreds of billions of dollars” in AI investment in the long term.
He added: “I continue to think that investing very heavily in capital expenditure and infrastructure is going to be a strategic advantage over time.
“It’s possible that we’ll learn otherwise at some point [but] at this point I would bet that the ability to build out that kind of infrastructure is going to be a major advantage for both the quality of the service and being able to serve the scale that we want to.”
Meta reported that usage of its AI has scaled to 700 million ‘monthly actives’ and has pledged as much as $65bn on capital expenditures – primarily on data centres and growing the company’s AI development teams.
Microsoft CEO Satya Nadella also echoed these sentiments.
“We ourselves have been seeing significant efficiency gains in both training and inference for years now,” he told investors, while also reporting that Microsoft’s AI business has now surpassed an annual revenue run rate of $13bn – up 175% year-over-year.
The firm has earmarked $80bn for AI investment while the Microsoft-backed OpenAI is eyeing up to a $25bn investment from SoftBank.
As reported by the Financial Times, this could see the Japan-based SoftBank spend more than $40bn on AI initiatives with OpenAI, the developer of ChatGPT.
Both OpenAI and SoftBank are jointly invested in Stargate, a new Texas-based joint venture that has pledged an initial $100bn to build out AI infrastructure in the US, however, President Donald Trump confirmed that the “monumental” investment could be worth up to $500m in the long term.
Reported investments, at least in the West, suggest that there is no slowing down in AI spending despite DeepSeek’s claims that it trained its latest chart-topping model for as little as $6m – a drop in the ocean compared to the latest projected outlay.
