1 big thing: Bursting AI's bubble
Data: Company filings, announcements. (Alphabet and Amazon estimates based on research reports.) Chart: Axios Visuals
A global AI rout sparked by news that China's DeepSeek had made impressive advancements left investors in the biggest tech companies nearly $1 trillion poorer than they were on Friday, Axios' Ben Berkowitz writes.
Why it matters: When lots of people are worried about bubble valuations in stocks or a specific sector, all it takes is a small poke to make the whole thing wobble precariously.
It can also challenge the fundamental assumptions behind an entire economy, like the nascent Trump administration's push to invest hundreds of billions of dollars in American AI supremacy.
🖼️ The big picture: In the 1950s, the Soviets beat the U.S. into space. In 2025, China appears to have potentially beaten the U.S. to build a better AI mousetrap.
Last week, the small Chinese upstart DeepSeek announced a new reasoning model, R1, that appears to outperform the best America has to offer, including OpenAI's ChatGPT, Anthropic's Claude and Meta's Llama.
The problem? Those companies spent billions of dollars building their models, fueling growth for companies like Nvidia, whose chips are the gold standard in that training process. (The company lost $600 billion in market cap alone Monday.)
DeepSeek says it spent a mere $6 million, figured out how to do it faster and more efficiently with cheaper hardware, and then released the whole thing as a free, open-source platform.
🥊 Reality check: This underscores the high stakes of the AI arms race with China, and raises questions about the previous U.S. government strategy of limiting chip exports.
"[T]he lack of access to high-end chips, particularly after the Biden administration tightened trade controls, still poses a major hurdle to China's development," Bloomberg reports, adding that DeepSeek's advance may "spur American lawmakers to redouble efforts to stop the nation from getting the most advanced technology."
🔎 Current context: President Trump's economic vision relies on massive growth, fueled by the AI boom that his closest advisers have sold as the country's future.
The biggest economic announcement of his first week in office was Stargate, a five-year plan to spend $500 billion on AI infrastructure. (Complicating matters, Trump ally Elon Musk immediately cast doubt on whether anyone actually had the money to fund the project.)
But if China can do AI better and faster at one one-thousandth of the cost, it casts a shadow on the rationale for spending that kind of money and leaves the country playing catch-up.
The markets yesterday started pricing in an AI future that's going to be cheaper and more accessible than they had previously assumed, Axios' Felix Salmon writes.
Why it matters: The less money that companies need to spend on the AI equivalent of picks and shovels — Nvidia chips and the electricity needed to power them — the more profitable they will be.
🔭 The big picture: The market's theory of AI, at least up until the end of last week, was that, broadly, bigger is always better.
Companies would see their share prices rise just on the announcement that they had bought a large number of Nvidia chips, even if they were extremely vague about what they intended to do with them.
Similarly, energy companies have been soaring on the grounds that there's no such thing as too much electricity when it comes to powering the AI revolution.
🥊 Reality check: DeepSeek has now shown that it's possible to produce a state-of-the-art AI that needs fewer and less powerful chips, less energy — and much less up-front investment.
That seems bad for Nvidia, which has an effective monopoly on AI chips, and it's also bad for power companies who were counting on surging demand from data centers.
The bottom line: What's bad for companies that sell AI products is likely to be good for companies looking to buy them.
And there are many more of the latter than there are of the former.
President Trump has been threatening friend and foe alike with the foreign policy equivalent of a two-by-four. Colombia's president found that out the hard way over the weekend when he tried to stop U.S. military flights carrying deportees back to Colombia, Axios' Marc Caputo and Brittany Gibson report.
"F--k around and find out," a top White House official told us.
Why it matters: Trump's worldview revolves around showing strength — a carrot-and-stick approach that usually is short on rewards and long on threats. But it's showing some results at least in Latin America, where Trump is determined to boost U.S. influence.
🇨🇴 On Sunday, after Trump threatened crushing tariffs and travel restrictions, Colombian President Gustavo Petro buckled and agreed to accept his country's nationals deported from the U.S.
"Other countries began reaching out after that" to discuss accepting deportees, the White House official, who wasn't authorized to speak on the record, said without elaborating. "There is more of a willingness to take back their citizens and to express that."
🇸🇻 El Salvador's president, Nayib Bukele, opted for the carrots. Three days before Trump's row with Petro, Bukele tentatively agreed with Trump to accept his citizens deported from the U.S., as well as Tren de Aragua gang members originally from Venezuela.
Secretary of State Marco Rubio's first foreign visit, coming soon, will be to El Salvador.
Trump "means what he says, and I think any nation that doesn't believe that is making very poor judgment," said Sen. Bill Hagerty (R-Tenn.), who served in Trump's first administration.
🥊 Reality check: One risk of swinging the two-by-four too often is that it disillusions allies.
🔭 Zoom out: Trump wants to showcase a new, aggressive foreign policy that hearkens back to the Monroe Doctrine and clearly establishes the Western Hemisphere as a China- and Russia-free zone. It's what makes him so focused on Cuba and Venezuela.
Rubio, National Security Advisor Mike Waltz, Latin America envoy Mauricio Claver-Carone and Trump's choice for ambassador to Panama, Kevin Cabrera, are all anti-leftist foreign policy hardliners.
📱 How it happened: Waltz frequently travels with the president and was with him when Petro, at 3:41 a.m. Sunday, posted on X that he would "deny" U.S. military flights of deportees to Colombia.
Trump was at his Doral resort near Miami, ahead of a meeting of House Republicans there. The resort is about a 10-minute drive from Rubio's home. Rubio hustled over, met with Waltz, and hammered out the outlines for a response to Petro.
"They got a plan. They presented to the president. It was done by lunch," said a source familiar with the conversations.
💨 "Nat Sec at the speed of social media," a White House official added.
There are about 3 billion medical imaging exams done per year with a 4% error rate — that's millions of patients.
The solution: "With Meta's free open source AI model, Llama, we built an AI tool to help catch radiology errors," says Dr. Clark.
Total Posts: 11277