By The Rio Times | Created at 2025-01-27 21:23:10 | Updated at 2025-01-31 23:47:21
4 days ago
A Chinese AI startup, DeepSeek, sent ripples through global tech markets on January 27, 2025. The company’s cost-effective AI model challenged industry giants, causing WEG S.A. (WEGE3) shares to plummet over 8% on Brazil’s Ibovespa index.
DeepSeek’s free AI assistant claims to match or surpass established models at just 3-5% of their operational costs. This breakthrough quickly outpaced ChatGPT in App Store downloads, signaling a potential shift in AI development paradigms.
The “DeepSeek Effect” reverberated globally. The Nasdaq index fell 3.4% in early trading, with tech giant Nvidia losing over $400 billion in market value. Asian and European tech indices also declined sharply.
WEG, a Brazilian industrial equipment manufacturer, felt the impact despite its geographic distance. The company had positioned itself to benefit from growing AI infrastructure demand. Now, uncertainty looms over its Transmission and Distribution segment, a key growth driver.
Analysts, including Lucas Laghi from XP, expressed concerns about future AI infrastructure spending. This uncertainty challenges the notion that massive investments are necessary for AI advancement, potentially democratizing the technology.
WEG’s Resilience and the “DeepSeek Effect”
Despite the day’s losses, WEG‘s stock still shows a 4% gain in 2025, following a 45.5% surge in 2024. BTG Pactual maintains a “buy” recommendation with a R$68 target price, viewing WEG as “indispensable” in the current market.
The company’s exposure to data center growth and energy infrastructure remains a strength. A favorable exchange rate, with the U.S. dollar above 6 Brazilian reais, provides some cushion against market turbulence.
As the tech industry faces this moment of reckoning, companies must reassess their strategies. The “DeepSeek Effect” challenges long-held assumptions about AI development costs, forcing adaptation and innovation.
This upheaval highlights the tech industry’s dynamic nature and the constant need for adaptability. As the AI landscape evolves, those who can pivot may emerge stronger in this new era of cost-effective AI development.
