Today’s stock market meltdown happened because a lot of smart people spent too much money on developing A.I. technologies in Silicon Valley. At the same time, over in China, a team of engineers, apparently working with limited resources launched their own A.I. technology. What has shocked the technology world is they have delivered a best-in-class technology for a fraction of the cost of the teams in Silicon Valley. By some estimates, by 30-times less.
This has far reaching consequences, not least in the race to dominate the A.I. technology race. What appeared to be a sure thing, with US dominance presumed, all of the sudden, the best laid plans are smashed.
So what does this mean in the near to medium term. For someone living here in Ireland, there are a number of immediate impacts, that is assuming all of the early reports on DeepSeek are accurate.
- Pension valuations – Nvidia, this is a Silicon Valley-based computer chip company which manufactures the powerful chips used by A.I firms. On the back of how well DeepSeek performs, Nvidia stock value has suffered the biggest market wipe-out in market history. Even if you don’t directly own Nvidia shares, it is highly likely your pension fund does. And more broadly, beyond Nvidia, the share value of all the Silicon Valley firms investing heavily in A.I., which includes Meta and Google will also see their share values under severe pressure. Falling valuations means that pension fund valuations will also fall, at least in the near-term.
- Data centres – the need for accelerated growth in data centre delivery will come into question. If some of the early reports from China are correct, the DeepSeek technology was done using far less computing power, then the need for massive data centres is flipped.
- Electricity usage – this is another area where there would be an ever-expanding demand using the US-based A.I. models. But the Chinese DeepSeek model appears to turn demand on its head. Already, energy stocks in the US have seen valuations soften. In the long-term, this can only be good news for citizens all over the world. Had A.I. electricity demand grown exponentially; it would have placed delivery to vast populations questionable. At a human level, this would have given rise to day-to-day challenges, especially in light of climate change (cooling homes as the planet warms). But it would almost lead to social disruption caused by rolling blackouts in the worst-case scenario.
- Home completions (maybe) – the ongoing shortage of home deliveries in Ireland is a social concern. For example, in 2006, Ireland saw the delivery of approximately 90,000 new homes. Today, the delivery is hovering in about one-third of that. In the meantime, the population has risen by about 1 million. Assuming the construction of data centres is no longer as critical as may have been thought just 1 week ago, surely the redirection of any resources to the delivery of homes would be a good thing.
- Employment – in some sectors, the disruptive power of DeepSeek is likely to speed up changes in employment. This includes the reallocation of employment resources. First, in the companies that were betting their fortunes on becoming A.I. leaders, DeepSeek almost certainly puts those plans at risk. Second, by launching A.I. technology for such little cost, it is likely to become a market disruptor much sooner. This will impact all-collar jobs (blue and white) in ways that are not yet even clear.
- Security – in some ways, the launch of a Chinese-based A.I. technology is a form of D-Day in the technology world. What had been assumed would be U.S. dominance in the sector is no longer a sure thing. The fact so many Silicon Valley tech geeks are themselves raving about the capabilities of DeepSeek, it’s a form of game-on moment when much of the world, including the new US administration has assumed to be a game-over situation. That is no longer the case. But for many, it begs the question, what’s next. What else will Chinese technology labs produce? In many ways, there is probably little coincidence that the DeepSeek was sweeping the world at the same time President Trump was announcing the A.I. project Stargate. Now, it seems that all bets are off.
- Employment – how US technology firms cope with emerging Chinese technology firms will have a major impact on their business models. This will have some employment impact here in Ireland.
- Economy – the longer-term impact of A.I. will have an impact on our economy also. Not only the day-to-day employment of people living here in Ireland. It will also impact the economy. At this stage, this may mean some companies may become more profitable because of A.I. but that may be on the back of fewer people being directly employed by them.
The coming days and weeks will reveal a lot more about how DeepSeek performs. But if the technology geeks in Silicon Valley are anything to go by, its is seismic.
Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz.
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