So I've long said that the valuation of OpenAI at a trillion(ish) dollars depends on OpenAI "winning" and "owning" AI and there being a sufficient moat to stay ahead of competition. Without that, the company is worth a fraction of that. Anthropic is probably positioned better here actually but it's still kinda true there too.

Ever since a Chinese firm released DeepSeek I immediately came to the realization that any US tech firm "owning" AI is simply not going to happen. China will make sure of it. It's in their national security interest not to let that happen.

From the POV of geopolitics, IMHO the US shot itself in the foot by banning the export of the best chips to China. The US also somehow has the power to prevent a Dutch company (ASML) from selling to China too. That makes a little more sense to ban but the combination of banning EUV exports AND banning the best chips sowed the seeds for the destruction of all of this.

By banning chip sales, the US inadvertently created a captive market for Chinese chips with Chinese companies. If there were no chip ban, Chinese companies probably would've bought US chips. But they can't. So they can only buy from Huawei and SMEE (indirectly). The US forced China to realize it was in their national security interest to copy the best lithography and, by extension, the best AI chips.

So DeepSeek was reportedly developed on either older NVidia hardware or smuggled newer NVidia hardware but that won't last either. At some point it'll be completely Chinese made chips that are doing this.

And what's the biggest cost for a model? Training. But you do that once and the model like any software is infinitely copyable so China can under OpenAI, Anthropic and SpaceX (xAI) and that's what they're doing.

But it gets worse for the AI moat. Local models are going to get cheaper and cheaper to run. You can already run 31B models on sub-$5000 hardware. What do you think it'll cost in 5 years? Will larager parameter models keep getting better or will there be a law of diminishing returns? What is a B100 workload now, will be a Macbook Pro workload in as little as 5 years.

What if all these AI data centers are ultimately just going to be commoditized cloud hardware like AWS in the not too distant future? We already see Google renting big from SpaceX. I think the writedown on all these data center investments and the companies that are doing them is going to be extreme in the next 5 years.