DeepSeek "raises macro upside, micro risks" - Goldman Sachs

Investing.com - The emergence of Chinese start-up DeepSeek could have upside macroeconomic implications in the medium-term should its cost reductions help usher in a period of increased competition in the development of artificial intelligence platforms, according to analysts at Goldman Sachs.

DeepSeek roiled global markets earlier this week when it said its AI model could offer similar performance to OpenAI's ChatGPT despite using less-advanced chips and being built for only around $6 million.

Although the claim has been sharply questioned, it has still fueled worries around the necessity of the billions of dollars in AI investments being pursued by American tech giants.

In a note to clients, the Goldman Sachs analysts led by Joseph Briggs said DeepSeek "has raised questions around whether the next stage in the investment cycle -- where cost savings on compute costs lower the nominal hardware investment necessary to train and use generative AI models -- is also arriving earlier than expected".

From a macroeconomic perspective, Briggs flagged that more efficient training of AI models and declining computing expenses could bring down AI-related capital spending, presenting "the main near-term risk" to the global economy.

However, AI-related investments have so far had "little impact" on official measures of gross domestic product, "thereby limiting downside even if investment does slow", Briggs noted.

Briggs also said the rise in popularity of a non-U.S. AI player could boost foreign adoption of the technology and prompt governments to lower regulatory barriers.

"Limited adoption is still the main bottleneck to unlocking AI-related productivity gains, and adoption would benefit from competition-induced acceleration in the buildout of AI platforms and applications," Briggs wrote.

Although DeepSeek's success could pose risks to specific companies, Briggs argued that the development has "added to our confidence that AI-enabled productivity gains will be a major macroeconomic story in [the] coming years".

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