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(GeekWire FIle Photo / Todd Bishop)
In an apparent response to the attention on a new AI model out of China, Microsoft CEO Satya Nadella posted online late Sunday to share an economics concept called Jevons paradox.
“Jevons paradox strikes again!” Nadella wrote on LinkedIn and X, linking to a Wikipedia page describing the phrase. “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of.”
It was an optimistic view — and a theory that would presumably benefit Microsoft — amid the craze over DeepSeek.
The Chinese startup has surged in popularity and skyrocketed atop app store rankings with its new open source AI model called R1 that offers similar capability to leading consumer chatbots from OpenAI and others — and perhaps most importantly, requires far less computing capacity and cutting-edge hardware.
Tech stocks including Microsoft, which provides AI computing infrastructure, and chip giant NVIDIA took a hit Monday morning amid concerns that the DeepSeek’s innovation could shake up the global AI landscape.
Earlier this week, Nadella called DeepSeek’s new model “super impressive in terms of both how they have really effectively done an open-source model that does this inference-time compute, and is super-compute efficient.”
“We should take the developments out of China very, very seriously,” Nadella said, according to CNBC.
Silicon Valley investor Marc Andreessen called DeepSeek R1 “one of the most amazing and impressive breakthroughs I’ve ever seen.”
Axios business editor Dan Primack noted that there could be repercussions for other startups building AI models.
“This could be an extinction-level event for venture capital firms that went all-in on foundational model companies,” he wrote. “Particularly if those companies haven’t yet productized with wide distribution.”
Wedbush analyst Dan Ives called it a buying opportunity for tech stocks and “not the time to panic as the bears try to finally rule the narrative today.”
“DeepSeek impressed the tech community with this LLM model…but this is not launching 100x the capacity/algorithms that is needed to even consider this a competitive threat in our view,” Ives wrote in a note Monday morning. He added: “No US Global 2000 is going to use a Chinese start-up DeepSeek to launch their AI infrastructure and use cases.”
Garry Tan, CEO at Y Combinator, also shared the Wikipedia page for Jevons paradox earlier on Sunday, noting: “This seems like an overreaction. Wall Street needs to read the Wikipedia page on Jevon’s Paradox.”
The paradox is named after William Stanley Jevons, an English economist who published the 1865 book The Coal Question, which noted that as steam engines became more efficient and used coal more effectively, the demand for coal actually increased instead of decreasing. The lower cost and increased efficiency made coal more attractive for a wide range of uses, leading to its expanded consumption.
Salesforce CEO Marc Benioff said DeepSeek shows that “the real treasure of AI isn’t the UI or the model — they’ve become commodities.”
“The true value lies in data and metadata, the oxygen fueling AI’s potential,” he said on X. “The future’s fortune? It’s in our data. Deepgold.”
