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Investing.com -- Oppenheimer analysts see the emergence of DeepSeek, an open-source Chinese large language model (LLM), as a mixed bag for major tech players.
While the development is positive for Amazon (NASDAQ:AMZN), it poses potential challenges for Microsoft (NASDAQ:MSFT), according to the firm.
DeepSeek’s cost efficiency is said to be a key disruptor. The model reportedly outperforms OpenAI’s leading technology while running on significantly lower-cost compute infrastructure.
Oppenheimer highlights that DeepSeek is charging “less than 1/20th of what OpenAI is,” which is likely to reduce inferencing costs across the AI ecosystem and catalyze new AI application growth.
The firm says Amazon’s cloud and AI strategy is well-suited to capitalize on this shift.
Oppenheimer notes, “Amazon has anticipated AI is moving to commoditized models and hardware and has designed its whole cloud/AI platform around this.”
In contrast, they state that Microsoft has relied heavily on its partnership with OpenAI and investments in higher-cost hardware. While Microsoft has begun shifting toward Amazon’s strategy, Oppenheimer stresses that “it needs to accelerate this” to remain competitive.
Another concern for Microsoft is OpenAI’s growing partnerships with companies like ARM and Oracle (NYSE:ORCL) through the $500 billion Stargate joint venture. While key elements of Microsoft’s arrangement with OpenAI remain intact, Oppenheimer sees this development as raising “concerns on the stability of the relationship.”
Overall, the analysts view DeepSeek’s emergence as a “negative for AI training and positive for inferencing infrastructure”, highlighting potential beneficiaries such as NET, DOCN, and EQIX.
Additionally, Amazon’s ability to leverage lower-cost AI models could make it disruptive in application segments like Contact Center as a Service (CCaaS), posing risks for competitors such as NICE, according to Oppenheimer.
For Amazon, the DeepSeek revolution aligns with its existing strategy. For Microsoft, it signals the need for faster adaptation.