AI Chips Demand: The Unexpected Impact of Cheaper AI Models

In an interview with CNBC, Dutch semiconductor giant ASML's CEO, Christophe Fouquet, shared an interesting perspective on the future of AI chips. He believes that new, low-cost AI models, like the one from China's DeepSeek, will actually boost demand for AI-focused chips. This is a surprising take, given that many investors feared these cheaper models could slow down semiconductor spending. ASML's recent quarterly report showed impressive sales and profit growth, with a massive order backlog of about 36 billion euros at the end of 2024. This news led to a surge in the company's shares. Fouquet didn't dive into the specifics of DeepSeek's new R1 model, which has been making waves for its performance and low cost. Instead, he focused on the bigger picture.He explained that a lower cost for AI means more applications, and more applications mean more demand for chips over time. This is great news for chipmakers like ASML, as it opens up new opportunities. Fouquet also noted that big tech companies, often called hyperscalers, like Microsoft, Amazon, and Google, are continuing to invest heavily in AI. These companies are pouring money into research and development, driving the need for more chips. DeepSeek's R1 model, released last week, is an open-source reasoning model that claims to outperform OpenAI's o1 model at a fraction of the cost. Open-source software allows for free modification and distribution, which could lead to even more innovations in the AI field.