‘Is DeepSeek a DeepFake or real?’ Doubts and questions emerge on Wall Street and in Silicon Valley

It’s the U.S. vs. China, complete with Chinese-style censorship, as my colleague David Meyer reports. [Sorry, TikTok, we’ll only love you if we get to own half.] 

It’s closed source vs. open source. The latter gives the public access to underlying codes and weights so they can modify and use it themselves.

It’s expensive vs. cheap. DeepSeek claims it took two months and less than $6 million to build its R1 AI model. President Donald Trump called the news a wakeup call for Silicon Valley.

It’s Big Tech vs. new tech. So much for the assumption that you need to be a behemoth sitting atop a mountain of data centers, chips, and dollars to win at this game. Even Microsoft CEO Satya Nadella says he welcomes the competition, despite his stock taking a hit on the news, too.  

It’s also us vs. them. Don Tapscott is working on a book about identic AI and argues “the entire model of AI needs to be redone.” He told me yesterday: “Rather than powerful corporations owning our digital future, AI should be decentralized, open, and community-owned and controlled. This vision is increasingly within reach thanks to a co-emerging foundational technology that makes decentralization possible.” 

For clarity on all this, turn to Fortune AI Editor Jeremy Kahn, who argues that we should all just relax. While DeepSeek is shaking up the AI market, he argues “the prognostications of Nvidia’s doom may be premature.”

Contact CEO Daily via Diane Brady, diane.brady@fortune.com, Linkedin.

More news below. 

TOP NEWS

DeepSeek doubts: Many people in Silicon Valley believe the market’s reaction to DeepSeek — $600 billion was wiped off Nvidia yesterday — is simply wrong. Even if DeepSeek’s claims are true (that it developed its new R1 model in just a few months at a cost of only $6 million), how would an incoming era of cheap, accessible AI reduce the demand for the powerful chips needed to run it at scale? Analysts at JMP published a note titled “Is DeepSeek a DeepFake or Real?” (We have an excerpt for you below.)

Chips not on the table: One unanswered question is how DeepSeek achieved such an impressive performance from its AI model without using Nvidia’s top-of-the-line H100 chips. The U.S.-made chips are export-restricted. Alexandr Wang, the CEO of Scale AI, has a theory: “My understanding is that DeepSeek has about 50,000 H100s which they can’t talk about, obviously, because it is against the export controls that the United States has put in place.”

Irony alert: DeepSeek is open-source, unlike Sam Altman’s OpenAI. OpenAI is now “by far, the most closed in every way possible,” according to AI developer and consultant Reuven Cohen. In a world of cheap, open-source AI, why would anyone pay top dollar for OpenAI?

AI Quote of the Day: “Even the CEOs who are engaging in the race have stated that whoever wins has a significant probability of causing human extinction in the process, because we have no idea how to control systems more intelligent than ourselves,” — Stuart Russell, professor of computer science at the University of California, Berkeley, via the FT.

The White House ordered a halt to all federal grants and loans. The president wants discretionary funding examined so that it doesn’t go to “woke” causes. Officials are scrambling to figure out exactly how much government spending this pause will represent. Trillions are potentially at stake — but there’s a lot of confusion.

Immigration raids begin. More than 3,500 undocumented immigrants have been arrested by ICE since Thursday.

Google will rename the Gulf of Mexico as "the Gulf of America" on its maps. But only after the name-change filters through into the U.S.’s official maps.

From Fortune

Meta forms DeepSeek war rooms
Meta has reportedly assembled four “war rooms” to assess how China’s explosive AI startup DeepSeek can match the efficiency of competitors at much lower costs, per The Information. Microsoft is also threatened, though CEO Satya Nadella wrote in a LinkedIn post on Monday that the new model could drive demand for AI across the industry.

The rough road to CEO of a Blackstone portfolio company
Private equity firm Blackstone uses a rigorous process that includes hours-long interviews that take recruits “back to their childhood” to find CEOs for their portfolio companies. Fortune spoke with Courtney della Cava, the firm’s senior managing director and global head of portfolio talent and organizational performance, to get a deeper look at the hyper-competitive recruitment system. Fortune

Ryanair CEO hopes Trump scares Europe
Ryanair CEO Michael O’Leary told analysts on Monday that he hopes President Donald Trump’s election jumpstarts the “complacent f–king liberal governments in Europe” that impose too many taxes on air travel. O’Leary specifically called out the center-left policies of the German and U.K. governments, warning that the airline may see lower traffic growth in 2026. Fortune

The markets

• The S&P 500 lost 1.5% yesterday as the DeepSeek release cratered shares of Nvidia. Nonetheless, the index stayed above 6,000. ... Nvidia was down 17% on worries that DeepSeek’s cheap-and-effective AI would reduce demand for its high-end chips. The Nasdaq was dragged down 3% as a result. … This morning, Japanese and China shares also took a hit. … But Europe largely moved up in early trading. … U.S. futures contracts suggested stocks might regain ground today — Nasdaq futures were up 0.5% this morning.

From the analysts

• JMP on DeepSeek: “Is DeepSeek a DeepFake or Real? … Last week, we spent three full days at the annual PTC conference in Honolulu, HI listening to a near feverish-like pitch by every single participant talking about how there is no way for suppliers of data center space and power to currently keep pace with the demands placed upon them from the largest hyperscale customers (cloud and AI) in the market. To think such a rival technological platform could be in development right under the noses of U.S. technology companies with no diminution of demand is very difficult to believe,” according to Greg P. Miller and Kassandra Fieber.
• Jefferies on DeepSeek: “We view DeepSeek's release as part of an ongoing evolution, not revolution, and think that this market reaction is largely overdone,” says Brent Thill and team.
• Baird on DeepSeek: “We note the rise of GPUs in graphics since the late 90s has been hardware driven, and are very skeptical on performance workarounds using simpler GPU architectures or pooling consumer CPU resources,” per Tristan Gerra and Tyler Bomba.
• JP Morgan on DeepSeek: “ … Investors are expressing a concern about the efficiency of DeepSeek, and while the initial concerns are largely stemming from a competitive standpoint, we view the development as largely a reminder to investors of the likelihood of an optimization phase for investments that will follow with even the US Hyperscalers and Tier 2 Cloud / NeoCloud providers to reach the best trade-off between efficiency and performance,” according to Samik Chatterjee and team.
• Wedbush on DeepSeek vs Meta, OpenAI, and Nvidia: “We believe 1) the AI race is still more about being the first to create models/applications that realize greater value from AI (vs. lowering cost) and 2) software efficiency yields historically have led to more hardware spending (e.g. virtualization, compression, etc.) not less, because the ROI of investing in hardware only increases.”
• Convera on the US dollar: “When adjusted for inflation, the dollar is as expensive as it was in 1985. Given this, Trump may look for ways to pressure trading partners into strengthening their currencies, potentially using tariffs as leverage,” according to Boris Kovacevic.

AROUND THE WATERCOOLER

Bitcoin tumbles amid broader market jitters over Chinese AI app DeepSeek by Catherine McGrath

How the Trump administration’s anti-DEI stance could reshape the future C-suite by Lily Mae Lazarus

Starbucks CEO Brian Niccol earned a $5 million bonus after 1 month on the job—and will collect another $5 million in March by Eleanor Pringle

Ben & Jerry’s is accusing its parent company of censorship because it allegedly blocked a post that mentioned Donald Trump by Alena Botros

Forget quiet quitting, Shark Tank star Daymond John says the loud quitting trend is ‘absolutely amazing.’ Here’s why by Chloe Berger

This edition of CEO Daily was curated by Joey Abrams and Jim Edwards.