They Invested Billions. Then the A.I. Script Got Flipped.
The New York Times
Venture capitalists plowed money into A.I. start-ups like OpenAI and Anthropic. But the rise of the Chinese A.I. start-up DeepSeek has called that funding frenzy into question.
Jordan Jacobs, an investor at the venture capital firm Radical Ventures, has spent the last few days fielding half a dozen calls from his firm’s investors. All of them wanted to know about DeepSeek, a Chinese artificial intelligence app that topped the app stores over the weekend.
DeepSeek had created a powerful A.I. model with far less money than most A.I. experts thought possible, upending many assumptions underlying the development of the fast-evolving technology. To calm the panic, Mr. Jacobs said he explained to his investors that Radical Ventures had long invested in more efficient A.I. models, similar to the one made by DeepSeek.
“Let’s focus on the companies who are actually building real businesses, rather than the ones that are chasing science fiction,” Mr. Jacobs said he told them.
Nvidia, Google, Meta and other giant tech companies have faced a barrage of questions about DeepSeek since last week as the Chinese start-up toppled longstanding notions about A.I. But its repercussions are being felt beyond the largest firms, reaching into the venture capital industry that has bet big on the technology by plowing billions of dollars into A.I. start-ups.
For two years, venture capital firms have been engaged in a funding frenzy, pouring more than $155 billion into A.I. start-ups between 2023 and 2024, according to PitchBook, which tracks start-ups. Two of those A.I. companies — OpenAI and Anthropic — have raised $24 billion and $16 billion with the goal of building A.I. that is as intelligent as humans. OpenAI’s valuation has hit $157 billion — more than Pfizer or Citigroup — while Anthropic’s valuation has reached $20 billion.
What DeepSeek did has now called that funding fever into question. If a Chinese upstart can create an app as powerful as OpenAI’s ChatGPT or Anthropic’s Claude chatbot with barely any money, why did those companies need to raise so much cash?
