DeepSeek Upends AI Industry; Trump Vows 'Much Bigger' Tariffs
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Good morning, I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with the Chinese artificial intelligence startup that roiled the global markets and led to the biggest one-day individual stock sell-off in history. For the latest on DeepSeek...

Let's bring in Bloomberg's John Tucker. John. Nathan, the deep-seek frenzy erased $589 billion from NVIDIA's market cap, the largest round in market history. The stock plunged 17%. The tech-heavy Nasdaq tumbled nearly 3%. Jordan Klein is managing director at Mizuho Securities.

It's a beginning of probably a consolidation phase and some profit-taking for sure. DeepSeek is sparking fear over U.S. tech dominance. Aaron Kennan of Clear Harbor Asset Management sees it this way. We're seeing what I would call sort of the gradual commoditization of artificial intelligence. DeepSeek's low-cost approach has reignited concerns that big U.S. companies have poured too much money into developing artificial intelligence. And Victoria Fernandez of Crossmark Global Investment weighed in.

Obviously, the tech game can turn on a dime. We've seen it over the last 24 hours. I do think that the U.S. is probably still a little bit ahead. DeepSeek even drew praise from NVIDIA. NVIDIA said in a statement that DeepSeek's model is an excellent AI advancement.

And DeepSeek's progress suggests Chinese AI engineers have found a way to work around U.S. semiconductor export bans, focusing on greater efficiency with limited resources. The latest AI model of DeepSeek, it's called RI, is now at the top of Apple's App Store rankings. And being in the spotlight all of a sudden also does bring problems. The companies had to limit signups due to large-scale malicious attacks on its services.

And even this morning, the company reports degraded performance. And this morning, Nathan and Karen, Nvidia shares, we should point out, they're up 5%.

All right, John, thank you. Well, the deep-sea sell-off on Wall Street also hit the world's elite, and we get that story with Bloomberg's Gino Cervetti. The world's 500 richest people lost a combined $108 billion on Monday. Billionaires whose fortunes are linked to artificial intelligence were the biggest losers. NVIDIA's CEO Jensen Huang saw his fortune fall more than $20 billion, or a 20% drop.

Oracle co-founder Larry Ellison's $22.6 billion loss was larger in absolute terms, but represented 12% of his fortune. Dell's Michael Dell lost $13 billion. Soaring valuations for so-called AI hyperscalers, including Meta

Alphabet and Microsoft have generated billions in wealth for their owners since OpenAI unveiled ChatGPT in November of 2022. These companies have spent huge sums to develop and run AI systems by hoarding top-of-the-line semiconductors and the energy supplies needed to run them.

Gina Cervetti, Bloomberg Radio. All right, Gina, thank you. One of DeepSeek's biggest competitors in the U.S. could be OpenAI. And in a post on X, the company's CEO, Sam Altman, said DeepSeek's R1 is an impressive model. He added, quote, we will obviously deliver much better models and also it's legit invigorating to have a new competitor, end quote. Meanwhile, we caught up with tech investor Kathy Wood to get her reaction about DeepSeek.

I think what it's telling us is the cost of innovation is collapsing, which it has been doing. I mean, the cost of AI training is dropping before this, 75% per year. The cost for inference, 85 to 90%. I think it throws the weight more towards inference chips from training chips. And so NVIDIA is highly exalted and deservedly so in the training chip space.

ARK Investment CEO Kathy Wood made the comments in an interview with Bloomberg earlier this morning in London. On Nathan, President Trump also weighing in on DeepSeek. The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win because we have the greatest scientists in the world.

And Trump also sees DeepSeek's apparent breakthrough as good because, quote, you don't have to spend as much money. And Karen, the president's also weighing in on the future of another Chinese company, TikTok. He told reporters on Air Force One that Microsoft is in talks to acquire the hugely popular app. Somebody's going to buy it, pay a lot of money, have a lot of jobs, keep a platform open and have it be very secure. If they don't sign, then it closes.

Following the president's comments, Microsoft declined to comment on the company's involvement in any possible deal.

Nathan, President Trump is also laying out more details on his tariff plans. At a speech to House Republicans at his Doral Golf Club, the president said he plans to impose duties on computer chips, pharmaceuticals and metals to encourage foreign production in the U.S. We want them to come back and we don't want to give them billions of dollars like this ridiculous program that Biden has. Give everybody billions of dollars. They already have billions of dollars.

They've got nothing but money, Joe. Later, the president told reporters he wants to enact across-the-board tariffs that are, quote, much bigger than 2.5 percent. Trump was responding to a Financial Times report that has newly confirmed Treasury Secretary Scott Besant.

supports starting with a global 2.5% tariff rate, then raising it by the same amount each month. And Karen, President Trump also says he hopes House Republicans will pass legislation to complete the border wall and step up deportation efforts while also extending his 2017 tax cuts and boosting oil and gas production. But the president's leaving the details up to them.

Whether it's one bill, two bills, I don't care. Let these guys, they're going to work it out. They're going to work it out one way or the other. But the bottom line, the end result is going to be the same. We want to have all of those benefits and we want to keep people's taxes low and actually make them lower. Following President Trump's speech, one GOP lawmaker called it not helpful that the president wouldn't be more specific. House Speaker Mike Johnson says lawmakers will spend much of their two-day retreat behind closed doors to come up with a strategy.

Well, Nathan, we turn now to the latest developments in the Middle East. Bloomberg News has learned Israeli Prime Minister Benjamin Netanyahu is planning to visit Washington next week to meet with President Trump. The sit-down would come at a critical time, just weeks until the end of the first phase of the pause in fighting in Gaza. Skeptics have questioned whether the deal will hold through its second phase, which could ultimately lead to a permanent end to the war in Gaza.

Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. After rain extinguished the last of the big Palisades fire in Los Angeles, the city is now allowing everybody to go back in to see what remains of their homes.

For the first time since the Palisades fire started and days after President Trump visited Los Angeles, Mayor Karen Bass announced all evacuees can return. Today is really about focusing on the recovery and getting people back home. This woman says some residents advised her not to go back because there's nothing left. It's a lot to lose.

Everything that you've collected, I think, over the last, you know, your adult life and even your childhood. The neighborhoods are only open to residents from 6 a.m. to 6 p.m. because there is no power and some areas require a police escort to get in.

The Centers for Disease Control and Prevention staff have been ordered to cut off all communications with the World Health Organization. This comes following an executive order from President Trump last week. A CDC's deputy director sent the directive in an email, which also said CDC staff assigned to work for the WHO are also being told not to come into the office.

Peter Maberduke is Access to Medicines Director at Public Citizen.

It's sometimes underappreciated how deeply the United States is involved in scientific collaboration internationally. There are more than 70 WHO collaborating centers in the United States. The United States pulls out our geopolitical competitors are waiting to fill that gap. Mayberdo can other experts say the sudden stoppage is a surprise and will set back work on investigating and trying to stop outbreaks.

of certain viruses in Africa. The MTA next month will begin releasing monthly review collection figures from New York City's new congestion pricing toll as the transit agency plans to borrow $500 million of short-term debt that the tolling program will ultimately repay.

Jai Patel, the MTA's deputy chief financial officer, said the authority will release at its finance committee meeting that it has so much collected so far in pricing revenue that the agency collected in January.

New York City's congestion pricing program is the first in the nation and charges most motorists $9 when they enter parts of Manhattan. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg, Erin. All right, Michael Barr, thank you. I'm alpine skier Michaela Schifrin. I've won the most World Cup ski races in history, but once.

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Time now for the Bloomberg Sports Update brought to you by Tri-State Audi. Here's John Stashower. John, good morning. Good morning, Karen. If you score 143 points in an NBA game, you're going to win. The Knicks did that Saturday. It was the most points they had scored in a non-overtime game in 45 years. Two nights later, again at the Garden.

They scored 143 points again. Beat Memphis by 37. Seven Knicks in double figures. Mikael Bridges the high man with 28. Knicks are rolling. Four straight wins. 16 the last 22. And the Celtics lost at home to Houston. Amen Thompson. 33 points for the Rockets. Had a game winning shot at the buzzer. Knicks are only a game behind Boston.

We'll be right back.

Suspended for a third time. He walked out of practice after learning he wasn't going to start the game. Certainly appears Butler's going to get traded before the deadline. Devils lost 4-2 at Philadelphia. Nothing like overtime in indoor partially simulated golf. Tiger Woods' team beat Rory McIlroy's team in TGL. Aaron Glenn introduced as the new coach of the Jets. Here was his message to his team. To any players that's here now, put your seatbelts on and get ready for the ride.

Put your seatbelts on and get ready for the ride. Listen, there are going to be some challenges. But when challenges becomes opportunity, it's opportunity. But here's what I do know. We're the freaking New York Jets. Who haven't made the playoffs in 15 years? Glenn was vague when asked about whether Aaron Rodgers will return. John Stasiewicz, Bloomberg Sports.

Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. It was the biggest single-day drop for one American company, and it is thanks to an AI startup in China. NVIDIA plunged 17% yesterday, wiping away $589 billion in market value.

on concern about DeepSeq and its competitive AI model with less advanced chips. For more, ARK Investment Management CEO Kathy Wood joined Bloomberg's Stephen Carroll and Lizzie Burden in our London bureau. Let's listen to that conversation now. Big question. You buying the dip?

Well, we're fully invested and we're very comfortable being fully invested. I think our confidence in the bull market broadening out has increased in the last few days. So, sure, the mega caps we think will continue to do well. Maybe NVIDIA, there are some questions about its exalted position in the training chip market.

We think inference is going to become more important with these new reasoning models, and that is a more competitive part of the market. But we think that what's happening here is the collapse in the cost of innovation. DeepSeek is adding to it. It has been happening, though. AI training costs have been dropping, led by NVIDIA, 75% per year.

And AI inference costs have been dropping 85% to 90% per year. DeepSeq is just putting those very rapid declines into a bit of overdrive here. So I wonder if you see NVIDIA falling much further. Is this an attractive price to be buying it, do you think?

Well, we own it in some of our portfolios. We are not buying the dip yet. We do want to learn more about DeepSeek and more about how the market or the demand for inference chips might outpace us.

those for training chips. We think the whole area is going to be vibrant. We just think there might be a little bit more of an adjustment to this new reality. When you say that what DeepSeek shows is kind of that you can do more with less capex, who do you think that's going to motivate in the U.S. most, as Donald Trump is kind of saying? Who's going to be best at doing more with less?

Well, anyone using AI, we are focused on the productivity gains for knowledge workers, which are going to be massive. That's the biggest impact of AI.

But if we're looking at sectors and spaces generally where this acceleration and innovation is going to be meaningful, we think autonomous mobility, so robo-taxis, we think that's going to scale from essentially nothing now to an $8 to $10 trillion global opportunity, including China. But the sleeper here is health care.

And we're seeing the convergence of sequencing technologies, all kinds of sequencing technologies, artificial intelligence, and then gene editing technologies like CRISPR-Cas9. That combination, we believe, is going to cure disease. It's already curing disease, sickle cell disease and beta thalassemia. That's CRISPR therapeutics.

But we think they're aiming now for type 1 and type 2 diabetes. That would be a category killer. So think about that. Curing disease, AI helping us.

Decode the secrets of life, death, health. Those are two areas where regulation plays a big part. You've spoken about your optimism about deregulation under Donald Trump. Do you think those are two areas we should expect to see big deregulation about what technology can get involved in?

Yes, I think in both, safety first. And I think anyone moving into this market or these markets would agree with that. So sensible regulation. But in the U.S., the robo-taxi field is regulated by 50 states. We think that will change to one regulator, the federal government. After all, transportation does cross states.

So that makes sense. In the healthcare realm, that is where the thicket of regulations...

has really strangled the industry. And even more than the outright regulations, it was the FTC, the Federal Trade Commission, not allowing mergers and acquisitions and therefore not allowing strategic buyers, big biotech companies, from...

not allowing them to buy the smaller companies so that we had price discovery. Now we're going to see price discovery. How much are these companies that are curing disease worth to these large strategic buyers?

Now, in saying that, I don't necessarily want our companies to be taken out. We think they have miles to go. But we do want price discovery back in the market. When you talk about your excitement about autonomous vehicles, of course, your biggest holding is Tesla, I think. And we've got Elon Musk's first earnings call tomorrow since Trump's return to the White House. January, typically a call that's a look ahead. What do you need to hear from Musk?

We need to hear a continuation of we're about to launch our autonomous driving system. I mean, in effect, they've launched it. I have full self-driving. I know it's not allowed here in the UK or in Europe. But the improvements... And you feel safe? Absolutely.

Oh, yes. Yes, yes, yes. Waymo really has broken through a lot of barriers. I feel even though a Waymo vehicle is not safer than a human-driven vehicle, it knows its roads, its narrow roads, meaning there are narrow territories.

I think Tesla is going to go national. That's going to be and we'll be able to do so because it has effectively seven million robots roaming the roads right now. I have two of them, a Y and a three. And they're learning all about Connecticut and Florida world roads.

So it has a huge competitive advantage in terms of proprietary data that nobody else has about the roads, not only in the U.S., but in many places around the world. Do you worry that Elon Musk is taking on too much? If he's got his new job in the U.S. government, he's got

sharp developments coming in Tesla, lots going on with his other businesses as well. Is he spreading himself too thin? If you look at the way Elon Musk behaves as a CEO, he's a sharpshooter. He looks for pain points and he solves those.

Right. And he's for example, right now, where was or in 2018, where was the biggest pain point? It was manufacturing the Model 3, scaling the Model 3. He slept famously in on the factory floor.

He's not doing that anymore. He's not on the factory floor. Now it's all about autonomous. He is the first, what we would call, CEO who really understands the convergence among technologies taking place right now.

really catalyzed by artificial intelligence, each one of his businesses. And he also understands how critically important proprietary data is. And think about this. Each of those companies is generating proprietary data that no one else has. Well, maybe you should add to his plate. Should he buy U.S. TikTok?

Yes, I mean, I know there have been rumors about that and about the government sharing half. And that's kind of anathema to the United States, you know, the government getting involved like this. I'd be surprised if that happens, but I will also say the Trump administration is full of surprises.

It certainly is. And we're only a week into it. You're here with us in London and we're delighted to see you. What has you in London? What opportunities are you excited about when you come to the UK? Is this a good place to put your money? Yeah.

Well, we have launched three funds. Arc Europe has launched three funds here. One is our flagship that is focused on all five innovation platforms, so robotics, energy storage, artificial intelligence, multi-omic sequencing, and blockchain technology. So that's the flagship, ARKK. A special one for Europe, which we do not have in the U.S.,

because of overlaps with other funds, but we have an AI and robotics fund. And that is ARKI. We think this convergence of robotics...

and AI is going to lead to humanoid robots and, you know, not just millions of them, but perhaps billions of them longer term, which is going to be a key productivity driver in both the home...

You know, right now, we're not paid for house cleaning. Let's get a robot. Let's pay a robot to do it. And in the manufacturing plants around the world. Cathy, the Prime Minister was in the building earlier, Keir Starmer. You're exactly the sort of person that he wants to meet because he wants investment going into those sorts of businesses in this country. Have you spoken to him? What sort of advice would you be giving him if he's trying to grow the economy? Well,

Well, half the solution is understanding the problem. And just making that statement suggests to me that he's saying, why hasn't this happened? And I also, over the weekend, heard one of the finance ministers or maybe the finance minister say the same thing. This is a mantra. And I think it has been catalyzed by artificial intelligence as well. If you think about the UK, you produced...

two of the most important AI companies in the world, DeepMind, which Alphabet now owns, and Arm, which SoftBank primarily owns. By all rights, you should be developing a deep venture capital pool here, feeding startups and nourishing them and deepening your listed equity markets. And so I think that's what they're going to do, which is fantastic.

It's fantastic for the UK, absolutely. They talk very ambitiously, the UK leadership, but so too do the European government's leadership. And Donald Trump, as you say, is very passionate about deregulation. So yes, everybody's on the same page, but it is a race. Is the UK keeping up enough with the EU and the US when it comes to deregulation for you to be really confident, Cathy, putting your money here?

I think that Europe is more tied up in regulatory knots than the UK is. And in fact, some of our companies, Palantir has been very vocal, for example, and we think that's one of the most important AI platform companies out there. Alex Karp, the CEO, has said, I am pulling employees out of Europe because, you

You know, we're running into all of these obstacles that could really harm us. You know, being hit by a 4% fine, 4% of revenue, and that's global revenue, or 7% of revenue I heard recently. That's crazy. So I think Europe is going to be held back until it gets its regulatory act together.

I think the UK is more progressive from a regulatory point of view. And as I said, I really believe that half the solution, the fact that...

your prime minister, your finance minister in the same week are saying, you know, we've got to figure this out. I think that's a very good thing for the UK. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify or anywhere else you listen.

You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121. Plus, listen coast-to-coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces.

And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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