TL;DR for this article: DeepSeek was certain to happen. The only unknown was who was going to do it. The choices were a startup or someone outside the

Hardcore Software by Steven Sinofsky

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2025-01-27 14:00:07

TL;DR for this article: DeepSeek was certain to happen. The only unknown was who was going to do it. The choices were a startup or someone outside the current center of leadership and innovation in AI, which is mostly in the US clustered around trillion-dollar companies. It turned out to be a group in China, which for many (me too) is unfortunate. But again, it absolutely was going to happen. The next question is will the US makers see this with clarity.

There's more in The Short Case for Nvidia Stock which is very good but focuses on picking stocks, which isn't my thing. Strategy and execution are more me so here's that perspective.

The current trajectory of AI if you read the news in the US is one of MASSIVE CapEx piled on top of even more MASSIVE CapEx. It is a race between Google, Meta, OpenAI/Microsoft, xAI, and to a lesser extent a few other super well-funded startups like Perplexity and Anthropic. All of these together are taking the same approach which I will call “scale up”. Scale up is what you do when you have access to vast resources as all of these companies do.

The history of computing is one of innovation followed by scale up which is that broken by a model that “scales out”—when a bigger and faster approach is replaced by a smaller and more numerous approaches. Mainframe->Mini->Micro->Mobile, Big iron->Distributed computing->Internet, Cray->HPC->Intel/CISC->ARM/RISC, OS/360->VMS->Unix->Windows NT->Linux, and on and on. You can see this at these macro levels, or you can see it at the micro level when it comes to subsystems from networking to storage to memory.