From Nasdaq: 2025-02-16 18:00:00

A new AI chatbot model from Chinese company DeepSeek has caught the attention of markets for its effectiveness and low cost, costing less than $6 million to develop. This has raised questions about the effectiveness of tech giant Alphabet’s AI spending, despite the company working on its own chatbot, Gemini.

Google DeepMind CEO Demis Hassabis acknowledges the impressive nature of DeepSeek’s AI model but emphasizes that it doesn’t bring any groundbreaking advancements to the table. While DeepSeek’s model may not pose a direct threat to Gemini, the open-source nature of the model suggests that other tech companies could leverage it for their AI development.

DeepSeek’s AI model, while not a huge concern in itself, raises questions about Alphabet’s planned $75 billion AI investment this year. Investors may be looking for tangible results and a return on investment sooner rather than later, especially as other tech companies may start scaling back on AI spending amid concerns about its effectiveness.

Investing in Alphabet’s stock may offer long-term potential, especially with a focus on AI-driven growth. However, concerns about heavy AI spending and the need for tangible results could introduce volatility in the short term, potentially leading to a correction in AI stocks. Risk-averse investors may want to observe the market before making a decision.

The Motley Fool’s Stock Advisor team did not include Alphabet in their list of top stock picks, emphasizing the potential for significant returns from other stocks. While Alphabet remains a strong tech investment, investors may need to navigate uncertainties around AI spending and market volatility before committing to the stock.



Read more at Nasdaq: Why This Google Executive Thinks the Hype Around DeepSeek Is Overblown