The emergence of China’s DeepSeek, a low-cost AI model that requires less advanced chips, initially sparked a global selloff in tech stocks. Investors raised concerns about the future of Western investments in chipmakers and data centres. Nvidia, a leader in the sector, saw its market value plummet by nearly $600 billion, marking the largest one-day loss in company history. However, since then, tech stocks, particularly in Europe, have rebounded, with some investors turning to a 160-year-old economic theory to explain the market’s recovery: the Jevons Paradox.
The Jevons Paradox, proposed by economist William Stanley Jevons, suggests that as a resource becomes more efficient, its demand can actually increase. In the context of AI, the paradox argues that as AI technology becomes cheaper and more accessible, its use will likely expand. This idea is gaining traction among European investors, with some believing that lower AI costs could drive a new wave of investment in software and AI technologies, particularly in areas like data and inference.
Despite some scepticism, several fund managers have embraced the paradox as a reason for optimism in AI markets. The potential need for data centres and infrastructure to support AI growth remains a key focus, though the rise of more efficient software like DeepSeek has led some to question whether the sector will require as many resources as previously expected. While the long-term outlook remains uncertain, many see the reduction in AI costs as a catalyst for further investment and growth, especially in European companies that rely on AI technologies.
Not everyone is convinced, however, with some analysts pointing to Nvidia’s rapid stock rise as a sign that market dynamics may be more complex than the Jevons Paradox suggests. Nonetheless, for many, the falling costs of AI technology have reinforced the belief that demand for AI-related investments will continue to thrive.
OpenAI has announced a new partnership with Kakao to develop AI products for South Korea. This marks OpenAI’s second major alliance in Asia this week, following a similar deal with SoftBank for AI services in Japan. OpenAI CEO Sam Altman, who is on a tour of Asia, also met with leaders from Samsung Electronics, SoftBank, and Arm Holdings. The partnership with Kakao is seen as part of OpenAI’s broader strategy to expand its AI presence in the region, with a focus on messaging and AI applications.
Kakao, which operates South Korea’s dominant messaging app KakaoTalk, plans to integrate OpenAI’s technology into its services as part of its push to grow its AI capabilities. Although Kakao has lagged behind rival Naver in the AI race, the company is positioning AI as a key growth engine. Altman highlighted the importance of South Korea’s energy, semiconductor, and internet sectors in driving demand for AI products, noting that many local companies will play a role in OpenAI’s Stargate data centre project in the US.
In addition to his work with Kakao, Altman met with executives from SK Group and Samsung to discuss AI chips and potential cooperation. SK Hynix, a key player in the production of AI processors, has been in discussions with OpenAI regarding collaboration in the AI ecosystem. Altman also indicated that OpenAI is actively considering involvement in South Korea’s national AI computing centre project, which is expected to attract up to $1.4 billion in investment.
Following the announcement, Kakao’s stock fell by 2%, after a 9% surge the previous day.
US telecom giant AT&T and Finnish network equipment maker Nokia have signed a multi-year agreement to upgrade AT&T’s voice services and 5G network automation. This deal comes after Nokia lost a significant contract to Swedish rival Ericsson in 2023, which led to Ericsson securing a $14 billion deal to build a network for AT&T covering 70% of its US wireless traffic by 2026. Nokia, however, remains involved with AT&T through a smaller agreement for fibre network development and a new contract focused on cloud-based voice applications and network automation.
The deal will enhance AT&T’s core network, enabling new voice services, including the integration of AI and machine learning. Although the financial details of the agreement were not disclosed, Nokia’s involvement is seen as crucial in bolstering its long-standing relationship with AT&T. Nokia’s president of Cloud and Network Services, Raghav Sahgal, emphasised that this agreement will allow for the deployment of new 5G functionalities.
Nokia recently reported stronger-than-expected earnings, driven by higher demand for telecoms equipment, particularly in North America and India. The company remains optimistic about its prospects in 2025, especially with plans to capitalise on the AI boom. Last year, Nokia also agreed to acquire Infinera for $2.3 billion to strengthen its position in the growing data centre and AI markets.
Waabi, a self-driving technology company, announced a partnership with Volvo’s driverless systems unit on Tuesday to develop autonomous big rigs. The collaboration aims to integrate Waabi’s virtual driver system, sensors, and computing into Volvo’s VNL Autonomous truck, which will be produced at Volvo’s New River Valley factory in Virginia.
The partnership comes as truck manufacturers and fleets look for ways to address driver shortages and reduce operational costs. Waabi, backed by Nvidia and Uber, uses its digital simulator, Waabi World, for testing and validation, with plans to launch commercial pilots in Texas within four years.
Unlike Tesla, which relies on a vision-only approach for its self-driving technology, Waabi uses a unique system to simulate real-world driving situations. The company also indicated that the deal with Volvo is not exclusive and they aim to integrate their technology with other truck manufacturers.
Volvo’s venture capital arm invested in Waabi in 2023, joining other backers such as Khosla Ventures and Porsche Automobil Holding. Waabi’s CEO Raquel Urtasun said trucking was a natural starting point for their technology, with plans to expand into areas like robotaxis and humanoid robots in the future.
Taiwan has officially banned government agencies from using DeepSeek AI, citing security risks and concerns over potential data exposure to China. The move strengthens previous guidance, which only advised against its use.
Premier Cho Jung-tai announced the decision after a cabinet meeting, stressing the importance of safeguarding national information security. Officials raised fears over possible censorship on DeepSeek and the risk of sensitive data being transferred to China.
The digital ministry had initially stated on Friday that government departments should avoid the AI service but did not explicitly prohibit it. The latest announcement formalises the ban, aligning with Taiwan’s broader approach to restricting Chinese technology.
Authorities in several other countries, including South Korea, France, Italy, and Ireland, have also scrutinised DeepSeek’s handling of personal data.
Chinese internet users have been captivated by the DeepSeek AI app, which has gained immense popularity since its launch during the Lunar New Year holiday. Users have explored its predictive and analytical capabilities, with some posing questions on politics, economics, and even personal matters. For example, law professor Wang Jiangyu asked how China should respond to US President Donald Trump’s tariffs, receiving a comprehensive seven-point answer that included potential new tariffs on US industries and other strategic moves. The model’s detailed responses have impressed users, though it censors certain politically sensitive topics, such as questions about Xi Jinping or the Tiananmen Square protests.
DeepSeek’s low-cost yet powerful AI has made waves in the tech sector, surpassing ChatGPT in downloads on the Apple App Store. The Hangzhou-based startup has become a source of national pride, with users sharing personal experiences, such as using the app to predict their fortunes or interpret dreams. This surge in popularity has drawn attention to the company’s rapid growth, and its founder, Liang Wengfeng, has emerged as a pop culture figure.
Despite its success, DeepSeek’s claims about the minimal cost of training its latest AI model—less than $6 million in computing power—have raised scepticism among some experts. Nevertheless, the platform’s effectiveness has prompted comparisons to the billions invested by US tech giants in AI development. The app’s rapid rise has also led to investigations by authorities in several countries, including Japan, South Korea, and several European nations, over concerns about its handling of personal data.
SoftBank Group CEO Masayoshi Son announced on Monday that he has agreed with OpenAI CEO Sam Altman to establish a joint venture in Japan, called SB OpenAI Japan, to offer AI services to corporate clients. This venture will be jointly owned by OpenAI and a company set up by SoftBank and its telecoms arm. In addition, SoftBank will pay $3 billion annually to integrate OpenAI’s technology across its group companies.
Son’s involvement with OpenAI is deepening, with reports indicating that SoftBank plans to invest between $15 billion and $25 billion in the company. SoftBank is also committing $15 billion to Stargate, a joint venture with OpenAI and Oracle to build AI capacity in the US. Son’s support for OpenAI follows a period of retrenchment for the investment giant, but he is reasserting his influence in the tech sector after setbacks in SoftBank’s tech portfolio.
In the context of rising competition, China’s DeepSeek has prompted some investors to question the immense funds being poured into US-based AI companies. However, Altman believes global demand for AI computing power will continue to surge. Son and Altman also met with Japanese Prime Minister Shigeru Ishiba on Monday to discuss further developments.
DeepSeek, a Chinese AI company, is shaking up the ΑΙ landscape by offering technology at a significantly lower cost compared to US competitors like OpenAI. Hemanth Mandapati, CEO of German startup Novo AI, recently switched to DeepSeek’s chatbot services, noting that the transition was quick and easy, and the cost savings were substantial. Mandapati reported that DeepSeek’s pricing was five times lower than what he was paying, with no noticeable difference in user performance. Analysts estimate that DeepSeek’s prices are 20 to 40 times cheaper than OpenAI’s, making it an attractive option for many startups.
The rise of DeepSeek is seen as a potential game-changer, particularly in Europe, where tech startups have struggled to compete with their US counterparts due to limited funding. Some believe DeepSeek’s low-cost offerings could democratise AI and help level the playing field with major tech companies. However, concerns about DeepSeek’s data practices, particularly regarding the potential copying of OpenAI’s data or censorship of Chinese content, have raised regulatory questions across Europe.
Despite scepticism around the actual cost of DeepSeek’s training and data usage, the company has garnered significant attention, especially after its model topped the productivity app rankings on the Apple App Store. Industry leaders argue that this shift in pricing could spark a broader movement in AI, with smaller companies gaining more access to advanced technologies without needing large budgets. This could foster innovation across the sector, although major corporations remain cautious due to security and integration concerns.
As the cost of AI continues to fall, competition is intensifying. For example, Microsoft recently made OpenAI’s reasoning model available for free to users of its Copilot platform. While price is becoming a dominant factor in AI adoption, industry experts suggest that trust and security certifications will still play a critical role for larger businesses when choosing their AI partners.
Alphabet’s self-driving unit, Waymo, has announced plans to expand testing of its autonomous driving technology into over 10 new cities by 2025. The company highlighted successful adaptation of its Waymo Driver system in diverse environments, encouraging this expansion. Current test sites include destinations such as Michigan’s Upper Peninsula and Tokyo, with new testing set to include San Diego and Las Vegas, among other yet-to-be-revealed locations.
The testing process will begin with manual driving through high-traffic and complex areas, including city centres and freeways. Trained human specialists will oversee the vehicles during this phase. Each city will host fewer than 10 vehicles for several months to collect data and refine the technology. Waymo previously expanded its autonomous ride-hailing service to Miami, Florida, as part of its broader strategy to capture market share in the competitive autonomous vehicle industry.
Waymo’s growth comes as the firm faces heightened scrutiny from regulators following incidents involving autonomous driving systems. In October, the company secured $5.6 billion in funding led by parent company Alphabet, aimed at bolstering its technological advancements and operational expansion.
The US Commerce Department is investigating whether DeepSeek, the Chinese AI company that recently launched a high-performing assistant, has been using US chips in violation of export restrictions. These chips are prohibited from being shipped to China, raising concerns about DeepSeek’s rapid rise in the AI sector. Within days of launching, its app became the most downloaded on Apple’s App Store, contributing to a significant drop in US tech stocks, which lost around $1 trillion in value.
The US has imposed strict limits on the export of advanced AI chips to China, particularly those made by Nvidia. These restrictions aim to prevent China from accessing the most sophisticated AI processors. However, reports suggest that AI chip smuggling from countries like Malaysia, Singapore, and the UAE may be circumventing these measures. DeepSeek has admitted to using Nvidia’s H800 chips, which were legally purchased in 2023, but it is unclear whether it has used other restricted components.
The controversy deepened when Anthropic’s CEO Dario Amodei commented that DeepSeek’s AI chip fleet likely includes both legal and smuggled chips, some of which were shipped before restrictions were fully enforced. While DeepSeek has claimed to use only the less powerful H20 chips, which are still permitted to be sold to China, the investigation continues whether these practices undermine US efforts to limit China’s access to cutting-edge AI technologies.
