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Investing.com -- Shares of Alibaba (NYSE:BABA) ticked up 0.7% Monday as the company could be among the first likely to secure a license for DeepSeek, an advanced AI technology. This move comes amid a broader market downturn, with U.S. tech stocks facing pressure over concerns related to DeepSeek.
Lynx Equity Strategy analyst KC Rajkumar provided insights into the licensing dynamics of DeepSeek, highlighting the potential competitive advantage for Alibaba. "As AI engineers tinker with the free download of the DeepSeek app and marvel at its open-source nature, we will make a point that has not found its way into media reporting. It is not as ‘open’ as you may think," Rajkumar explained.
The analyst elaborated on the distinction between the open-source nature of DeepSeek for demonstration purposes and its commercial usage. "The LLM is free, but only for demo usage. It may not be ‘free’ for commercial usage by data centers," said Rajkumar. He also noted that while the core language model (LLM) of DeepSeek is freely available, key elements of the algorithms, particularly those related to data compression, may be patented. This compression significantly enhances the efficiency of DeepSeek, allowing it to perform comparably to its peers with a much smaller data footprint.
Rajkumar's analysis suggests that U.S.-based hyperscale cloud service providers (CSPs) may face hurdles in accessing DeepSeek due to these patent protections. "Due to the patent protection, US based hyperscale CSPs may not be able to get access to DeepSeek in the medium term. They eventually might. In the meantime, we expect Asia-based CSPs to get licensed ahead of their US-based counterparts. BABA could be among the first," Rajkumar stated.
Investors appear to be responding to the potential for Alibaba to gain early access to DeepSeek, which could offer the company a technological edge over its competitors, particularly in the realm of data processing and AI capabilities. The licensing advantage could be a significant strategic benefit for Alibaba as it navigates the competitive landscape of cloud computing and AI technologies.
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