CNBC's Deirdre Bosa joins 'The Exchange' to discuss what DeepSeek's arrival means for the AI race.

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The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

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DeepSeek has made a significant impact on the artificial intelligence race, altering the competitive landscape. Recent reports indicate that the White House is contemplating tightening restrictions on NVIDIA's sales to China. The export controls on NVIDIA, a major player in AI hardware, could play a critical role in this evolving industry. Previous attempts to curb NVIDIA's exports reportedly led to unintended consequences, such as the emergence of DeepSeek.

Alibaba has introduced a new AI model that it claims surpasses DeepSeek's version three, adding another layer to the competitive atmosphere. The concept of "distillation," which involves creating smaller and faster AI models while retaining learned information, is gaining traction. Companies like Alibaba and Meta are aggressively pursuing this approach, seeking leaner and more cost-effective models.

The potential impact of new export controls is a topic of considerable interest. Should stricter measures be implemented, they could inadvertently stimulate competition within China's chip industry. Reports suggest that DeepSeek may utilize Huawei chips for its operations, demonstrating China's resourcefulness in circumventing external constraints. The AI landscape continues to transform, with companies striving to innovate and adapt amid regulatory challenges.



DeepSeek and distillation: Why the AI race will never be the same

Welcome back, NVIDIA is once again the talk of the day. It's the stock of the day. It's now down more than 6 percent. There are new reports just a few moments ago that the White House is considering tightening curbs on their China sales. Of course this comes as the A.I. trade A.I. trade tries to find its footing post deep seek. And the Internet giant Alibaba is out with a new A.I. model of its own which it claims outperforms deep seeks version three. Let's get out to Deirdre Bosa with more on this rapidly shifting race. But today's headline potentially from the you know from Washington is a reminder that where the rubber meets the road here may be in exactly how much and to what extent the government constrains NVIDIA from trying to do further business in China. Yeah I don't know the details of what they're going to do differently but it should be different because the previous export controls not only were they useful they backfired. They essentially led to deep seeking. All of this just fits into this overarching theme. Welcome to the A.I. race post deep seek. This is a breakthrough so significant it redraws the battle lines and it makes the winners of the previous era open and Microsoft makes them look like sore losers accusing deep seek of using open A.I. inputs. That is the kettle calling the pot black because just like open A.I. trained chat TBT on Internet data deep seek trained its model on updated we think likely updated generative A.I. Internet data. So sure copy the playbook but it did so far more efficiently and then open source it and innovated on top of it. You can see all of this because it's open source and published the research paper accusing deep seek of using open A.I. outputs. Again this is just kind of ironic to hear it from open A.I. to sum up the new race in one word distillation a way to shrink a big A.I. model into a faster smaller one while keeping what it learned. Here's what Databricks Ali Godsey told me earlier this week. So we're going to just see distillation happening left and right. It's already happening. Like there's so many versions of deep seek that have been reproduced and redone just in the last week as we speak. So this distillation is going to just create so much competition at the LLM or the A.I. layer. And so Alibaba's new Quinn model which it claims surpasses deep seeks V3. That is part of this new frenzy posted deep seek one that meta the American open source leader is no doubt already engaged in working on deep seek is already leading to a re ranking in A.I. leadership. One where the winners will be the companies that can iterate the fastest making models leaner cheaper and more accessible. And so those new export controls whatever they shape up to be Kelly it's going to have to work a lot differently because the race has just totally changed. Well you wonder if they're just going to clamp down a lot further and just say you know because last time around I think they said OK you can make this high power version for a little while and then they clamp down on that. And if they literally just start saying no leading edge chips of any kind from NVIDIA to China that would be a big deal. But but what's going to happen then. It's going to actually force China's chip industry to race even faster. There's been reports that deep seek is using Huawei chips for inferencing. Right. So the Chinese are incredibly resourceful. Going back to this phrase I know everyone's heard a million times this week but really necessity is the mother of invention. The Chinese have found ways to work around this. It's hard to think that they won't continue to do so. And I will say like Arvind Sreenivas the CEO perplexity told us a few weeks ago the way to sort of beat deep seek is to out innovate them. Just continue to compete instead of trying to outlaw some of these factors. Although maybe they'll try to do both at the same time for now. We'll see. Like you said Deirdre. Thanks Deirdre Bosa. Appreciate it.

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