DeepSeek: ASML boss says to expect 'more elephants in the room' to surprise markets

The boss of semiconductor equipment giant ASML Holding NV (NASDAQ:ASML) said the market should get used to the sort of shocks provided by China's DeepSeek, but the emergence of more efficient artificial intelligence models should be embraced for lowering costs. 

Speaking after the publication of the Dutch group's fourth-quarter results, ASML chief executive Christophe Fouquet told reporters: “I know some of you maybe were surprised in the last few days that a new company suddenly comes and wants to compete.

"Well, I think we have to get used to that, because this is such an opportunity that there will be more and more players to grab this."

ASML has done well from the demand for its giant machines that enable the manufacturing of microchips or graphics processing units to power and train AI large language models.  

"AI is a huge opportunity," Fouquet said. "Therefore, I think you should expect to see a few elephants in the room in the next few months, or few years, because everyone will want to be in."

But he argued that the billion-dollar investments in chips and data centres by "hyperscalers" such as Nvidia's four main customers Microsoft, Alphabet, Amazon and Meta, the actual number of chips related to those buildings is "pretty small in fact".

The Frenchman, who was promoted to CEO last year, said ASML expected demand for its own products "will come more from the use of AI" rather than training LLMs, from the numbers of chips used for AI in applications in phones, cars, robots, factories and labs.

"If you want to have an AI chip on your phone, the cost of those chips has to be a fraction of what maybe the hyperscaler can pay for it."

"If the cost doesn't go down, you may continue to sell a few very expensive chips and make a few people very happy, but you will not basically bring this technology to the masses and the volume will remain small."

"I don't know exactly what DeepSeek can or cannot do, but I say again, anything that will drive costs down is good news for ASML on the long term," he said.

Fouquet argued that if DeepSeek’s claims that it trained its model much more efficiently than OpenAI's GhatGPT 4 and Meta's Llama 3, it could lead to a widespread cutting of costs for AI models.

"Any technology, whatever it is, that will contribute to a cost reduction over all of AI, will increase the opportunity.

"This has been true in this industry for the last 40-60, years. I think it's still true moving forward.”

After the DeepSeek launch knocked over $1.5 trillion off stock market valuations, analysts at Deutsche Bank drew an analogy with the EV sector, and wondered: Do you do not need a high-end Tesla Model X car just to run quick errands, when perhaps the cheaper BYD can handle day-to-day needs?

The analysts said that US restrictions on the export of certain high-end chips may have pushed Chinese companies to innovate in software rather than rely on brute-force hardware, which might not bode well for the likes of ASML and Nvidia.