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Global Category Intelligence
Q2 2025
Global Category Intelligence
Q2 2025
ALERT -- DeepSeek R1 in AI: A New Development
Recently, the Chinese AI research company DeepSeek introduced R1, a new artificial intelligence model. In performance across several benchmarks, DeepSeek R1 has been compared to OpenAI's o1. Development costs were reportedly under USD 6 million, a fraction of the resources typically allocated by major US technology companies such as OpenAI, Google, Microsoft, and Meta.
Market Impact
The release of DeepSeek R1 coincided with fluctuations in the technology sector. On January 27, Nvidia shares fell by 17%, erasing over USD 600 billion in market value, while TSMC saw a 14% decline. These drops contributed to a total US market capitalization loss of approximately USD 1.1 trillion shortly after the market opened. Over the weekend of January 27-28, DeepSeek R1 reached the top of Apple's App Store rankings.
Open-Source vs. Closed-Source AI
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Open-Source AI: DeepSeek R1 follows an open-source model, making its code publicly accessible for viewing, modification, and distribution. This approach encourages contributions from global developers.
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Closed-Source AI: In contrast, AI models like ChatGPT operate under a closed-source model, maintaining controlled development but limiting transparency and external collaboration.
Economic Impact
By eliminating licensing fees, open-source AI can lower operational data analysis costs and drive computing infrastructure investments.
Impact on Capital Expenditure (CapEx)
Using open-source AI may save procurement costs by reducing reliance on subscription-based licensing. This shift could increase investments in regional data centers and cloud services, improving scalability and efficiency in AI applications.
Implications for Indirect Procurement
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Demand Increase: Growth in AI adoption is expected to drive demand for IT infrastructure, cloud services, and energy solutions.
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Supply Chain Management: Challenges such as semiconductor shortages may arise, requiring strategic supplier diversification.
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Strategic Shift: Adopting open-source AI could foster industry collaboration, prompting procurement teams to refine vendor management strategies and spend control mechanisms.
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