Why China's DeepSeek AI is such a big deal

0:01NPR

0:11This is the Indicator from Planet Money. I'm Darian Woods. I'm Weyland Wong, and joining us today is Planet Money's very own Jeff Guo. Hello, Jeff. Always nice to be here, Weyland. It is time for Indicators of the Week, our look at the numbers from around the news. This week, we have figures from President Trump's first major AI announcement. We've also got Chinese AI makers making waves. And a royal settlement with some eye-popping details. That's all after the break. This message comes from NPR sponsor Zendesk. Introducing the next generation of AI agents built to deliver resolutions for everyone.

0:54With an easy setup that can be completed in minutes, not months, Zendesk AI agents resolve 30 % of interactions instantly, quickly giving your customers what they need. Loved by over 10 ,000 companies, Zendesk AI makes service teams more efficient, businesses run better, and your customers happier. That's the Zendesk AI effect. Find out more at Zendesk.com. It's Indicators of the Week. Darian, you're up first today. My indicator is$500 billion. And that was the focus of a White House press conference on Tuesday. A new American company that will invest$500 billion, at least, in AI infrastructure in the United States.

1:34President Donald Trump stood at the podium, flanked by tech titans Larry Ellison and OpenAI's Sam Altman, as well as tech investor Masayoshi Sun. He was announcing that this new company would immediately invest$100 billion in building new servers to run AI models. It would then aim to invest a total of$500 billion within four years. That's a lot of money, even for a tech company, you know? Yes. And what I really want to talk about today is how this$500 billion price tag highlights something unusual about the economics of AI. I'm listening. So to set the scene, a big reason we have tech monopolies like Google or Microsoft is because it costs a lot of upfront money to build a good search engine or spreadsheet software.

2:20But then each new search result or copy of Microsoft Excel costs the company close to zero. As economists say, the marginal cost is really low. And so that means it's hard for competitors to go up against a Google or a Microsoft. The tech giants have done that upfront investment, building their products and can do whatever it takes to retain customers. But for AI, the cost of that question you're asking ChatGPT or Claude is not close to zero. The other week, my husband was like, we should ask ChatGPT about this. And I was like, but what about our utility bill? And I was obviously being flipped, but I've read that each AI query takes enough energy to power a light bulb for a few minutes, like a lot of electricity.

3:06Yeah, it's 10 times more energy than a traditional Google search. And that's for the common models. The more advanced AI models are way more intensive. And that's where the old economic framework of super low marginal costs might be quite different for AI. If the costs of an AI query is still quite expensive, a company like OpenAI might not be able to amass as much domination as the old tech companies did. Right, because it's not enough just to have the best AI models, you also have to have the giant data center to back it up. That's right. Okay, well, my indicator this week, coincidentally, also has to do with AI, but it has to do with these AI models.

3:47So, So on Monday, a company released what might be the most powerful AI model in the world right now. Okay. Yeah. Whoa. Yeah. But it wasn't OpenAI. It wasn't Google or Meta. It was this little Chinese startup called DeepSync. And apparently their new model, it goes toe-to-toe with the most powerful model from OpenAI itself. DeepSync claims that it even beats OpenAI's model on certain math tests. So people kicked the tires on this? Well, that leads me to my indicator of the week, which is the number zero. Because this super powerful new AI model, it is free. It is open source. DeepSeek released the whole thing to everybody on Monday.

4:32So anybody can download it and run this model? Yeah. They've even released like smaller versions of the model you can run on your laptop. So that is what I've been downloading literally right now. So hang on. What's your status bar? How long do we have to sit here, Jeff? Wait, no, no, it's downloaded. Hold on, let me share my screen for a second. Yeah. All I got to do, I hit run. Would you like to meet your new AI overlord? Sure. Anybody want to ask you a question? What is the sound of one hand clapping? What is the sound of one hand clapping? Let's do it. It's processing. Okay, so you see, it takes you through its chain of thought.

5:11So it's like, okay, I'm trying to figure out this question about one hand clapping. Is it like a philosophical question? Is it a riddle? Yada, yada, yada. So it just goes on and on and on. Oh, it's so chatty. Yeah, and it like self-critiques itself to try to find holes in its own answer. And it kind of just like goes in circles and circles. It said in summary, and now it's giving us a numbered list with more answers. Yeah. So this is a huge deal in the world of AI. It's a huge deal for the entire world for two reasons. Number one, there are like major geopolitical implications, right? Because for the past few years, the U.S.

5:48has been trying to slow down China's AI progress. It's been blocking the sale of advanced microchips to China. Seems like that hasn't worked. Yeah, it seems like even without those advanced chips, Chinese companies are still able to make cutting edge AI. Which maybe relates to my point earlier about the economics of AI being perhaps different than traditional software. even more so if the actual research and development is more easy to copy, but then the actual running is where that's going to be costlier and require companies competing to do. Yeah, exactly. That's kind of the other reason this is such a big deal because companies like OpenAI, they've been able to charge a premium because they have supposedly the most advanced models in the world, but now they're competing with free.

6:36And on top of that, you know, they have all these data center costs that they have to, you know, pay. This is your new AI overlord. This is the cutting edge right here in front of us. So what's the TLDR on our clapping question? So while physically there's no sound from one hand clapping metaphorically, it speaks to individuality, focus, and the limitations of singular actions without support. Thank you. Thank you, Deep Seek. Wow, very thoughtful. Okay. It really is deep. And that brings us to your indicator, Waylon, across the very deep Atlantic to the United Kingdom. That's right. My indicator is about Prince Harry, a.k.a.

7:18the Duke of Sussex. He settled a lawsuit against newsgroup newspapers. This is the Rupert Murdoch-owned media company that Prince Harry had accused of hacking his phone and doing other unlawful things. So as part of this court settlement, the company issued a, quote, full and unequivocal apology for intruding into Prince Harry's private life for 15 years. That is my indicator, 15 years. And so this is the same phone hacking scandal that we've been hearing about in the news for quite a long time. Yes, this scandal is almost 20 years old, depending on where you want to start the timeline. And the settlement with Prince Harry comes at the last minute.

7:57The two sides will now avoid a trial. And there actually have been over 1 ,300 settlements in this scandal. Murdoch's companies have paid out over a billion dollars in settlements over the years. Wow. So did Prince Harry get what he wanted? Well, he did get an undisclosed amount of money. The New York Times reported that it was at least$12 million. He also got a public apology, plus an apology to his late mother, Princess Diana, for the intrusion into her private life when Prince Harry was young. But the thing is that he had also talked about how airing all of this out in a trial was necessary for full accountability.

8:36And now there's no trial. And what I found really interesting is that economics might have played a role here. OK, so some game theory. Yeah, it's always time for some game theory. So under British law, if they had gone to trial and Prince Harry had won, but the damages he got awarded were less than the settlement offer, he would have had to pay the other side's legal costs. And that could be a lot of money, even for a prince or a juke or whatever his title is now. Yeah. I mean, last year, the actor Hugh Grant settled his lawsuit against the same Murdoch-owned media company. And he said at the time, the prospect of having to pay the other side's legal costs was just too risky.

9:17Like, he couldn't do it. So I think he said something like, I am shying from that fence, which I think is like an equestrian thing, but I'm not sure. And this is not the way it works in the U.S.? No. So I think the incentives are quite different when it comes to settling this kind of thing. He's just a boy standing in front of a court asking to settle a super expensive lawsuit. Darian. And the Oscar goes to Darian Woods. Who would you like to thank, Darian? Well, I'll do it. This episode was produced and fact-checked by Julia Ritchie with engineering by Neil Rauch. It was edited by Patty Hirsch.

9:51Kiki Canyon is the show's editor and The Indicator is a production. of NPR.

10:23at grammarly.com slash podcast. That's grammarly.com slash podcast.