Growing awareness of DeepSeek's newly released AI model has led to a significant downturn in technology stocks this week, as investors reacted to concerns over potential cuts in spending on the powerful graphics processing units (GPUs) essential for AI workloads. The release of DeepSeek's R1 model, an open-source reasoning model that claims to outperform OpenAI's o1 model in both cost and performance, triggered widespread apprehension. This development has particularly impacted Nvidia, which suffered a historic loss of nearly $600 billion in market capitalization on Monday alone.
The ripple effects were felt beyond Nvidia, with semiconductor stocks, including ASML, also experiencing substantial losses. DeepSeek's announcement has raised questions about the extravagant expenditures by leading AI companies such as OpenAI and Microsoft on Nvidia GPUs. Despite the market turbulence, ASML CEO Christophe Fouquet remains unfazed by the implications of DeepSeek's advancements for AI hyperscalers and chipmakers alike.
ASML managed to beat estimates for both sales and profit in the fourth quarter, boasting an order backlog of approximately 36 billion euros ($37.4 billion) by the end of 2024. The company's high-precision extreme ultraviolet (EUV) tools contributed 3 billion euros out of the 7.1 billion euros in net bookings reported for the fourth quarter. The market responded positively to ASML's performance, with shares rising as investor fears of reduced semiconductor spending eased.
Fouquet expressed confidence in the continued demand for AI-focused chips, stating that the current capital expenditure by hyperscalers, such as Microsoft, Amazon, and Google, is more about investment rather than a slowdown. These tech giants are heavily investing in data center infrastructure to support AI models and expand their capabilities.
"For AI to really come to life in the next few years — not only with the hyperscalers, but with all of us in our phone, PC — we need AI to address two things: cost and energy consumption." – Christophe Fouquet
According to Fouquet, a lower cost of AI could lead to more applications across various devices, ultimately increasing demand for chips over time.
"We believe that anything that will go in the direction of lowering cost on AI is, in fact, probably news because this will allow applications to go to many, many more devices." – Christophe Fouquet
"A lower cost of AI could mean more applications. More applications means more demand over time. We see that as an opportunity for more chips demand." – Christophe Fouquet
The release of DeepSeek's model has sparked speculation that it might reduce demand for ASML’s EUV machines. However, Fouquet remains optimistic that the opposite could occur. As more applications emerge from cost-reduced AI models, he anticipates an increase in chip demand.
"For the hyperscaler, the capex is today spent for investment. They are investing heavily in R&D. They continue to want to do that." – Christophe Fouquet