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Microsoft and Meta Defend Heavy AI Investments Despite DeepSeek’s Low-Cost Advantage

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In response to the breakthrough low-cost AI models developed by Chinese startup DeepSeek, CEOs of Microsoft and Meta have defended their substantial investments in artificial intelligence, emphasizing that the heavy spending is essential to staying competitive in the rapidly growing field. DeepSeek’s claims of outperforming Western AI models at a fraction of the cost have sparked concerns over the U.S. tech industry’s dominance, but both executives stressed that building extensive computing infrastructures is crucial to meeting rising corporate demands.

Meta CEO Mark Zuckerberg highlighted the strategic advantage that heavy investments in capital expenditure and infrastructure will bring over time. Microsoft CEO Satya Nadella echoed this sentiment, stating that such investments are needed to address the capacity constraints that have limited the company’s ability to capitalize fully on AI opportunities. Nadella also noted that as AI becomes more efficient and accessible, demand for the technology will grow exponentially.

Microsoft has allocated $80 billion for AI in its current fiscal year, while Meta has committed up to $65 billion. This stands in stark contrast to the roughly $6 million that DeepSeek claims to have spent on developing its AI model. However, U.S. executives and analysts note that DeepSeek’s reported costs are limited to computing power, not including broader development expenses.

Despite these substantial investments, investor patience is waning. Microsoft shares dropped 6% after the company revealed that its Azure cloud business growth would fall short of third-quarter expectations. Brian Mulberry, portfolio manager at Zacks Investment Management, emphasized the need for a clearer path to monetizing the investments.

Meanwhile, Meta’s stock rose more than 4% following a strong fourth-quarter performance, though its first-quarter sales forecast was underwhelming. Analysts, like Daniel Newman from Futurum Group, pointed out the disparity between capital expenditure and revenue generation in the AI sector.

Both companies have indicated efforts to moderate spending. Microsoft CFO Amy Hood stated that capital expenditures for the third and fourth quarters would remain around $22.6 billion, similar to the previous quarter, with growth rate expectations for fiscal 2026 being lower than in fiscal 2025.

 

French Privacy Watchdog to Investigate DeepSeek Over AI and Data Protection

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France’s data privacy authority, the CNIL, announced on Thursday that it will question DeepSeek to assess the workings of its AI system and potential privacy risks for users. The Chinese AI startup gained international attention after revealing that training its DeepSeek-V3 model required less than $6 million in Nvidia H800 computing power.

A CNIL spokesperson confirmed that its AI department is currently analyzing DeepSeek’s tool and will engage with the company to understand its system and data protection measures. The French regulator is among the most active in Europe, having previously fined tech giants like Google and Meta for privacy violations.

DeepSeek is also under scrutiny in other parts of Europe. Italy’s data protection authority recently requested details on its handling of personal data, while Ireland’s Data Protection Commission has inquired about data processing practices related to Irish users.

The European Union maintains strict privacy protections under its General Data Protection Regulation (GDPR), widely regarded as one of the world’s most comprehensive data privacy laws. GDPR violations can result in fines of up to 4% of a company’s global revenue. Additionally, new EU AI regulations impose transparency obligations on high-risk AI models, with penalties ranging from 7.5 million euros (or 1.5% of turnover) to 35 million euros (or 7% of global turnover), depending on the severity of violations.

As regulatory scrutiny intensifies, DeepSeek faces mounting pressure to demonstrate compliance with European data protection standards.

 

Blackstone Remains Committed to Data Center Investments Despite DeepSeek Concerns

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Blackstone reaffirmed its commitment to data center investments on Thursday, dismissing concerns that the rise of DeepSeek’s low-cost AI models would weaken demand for physical infrastructure. The alternative asset manager, which holds $80 billion in leased data centers, emphasized its “prudent approach” and strong partnerships with major global companies.

Data centers remain critical for AI development, providing the infrastructure needed to store, process, and analyze massive datasets. While investors previously saw data centers as key beneficiaries of AI growth, DeepSeek’s unexpected emergence has sparked debate over whether lower-cost AI models could reduce demand for such facilities.

Blackstone’s President and Chief Operating Officer Jonathan Gray addressed these concerns in a post-earnings call, stating that while the company is monitoring DeepSeek’s impact, lower AI costs could actually drive broader adoption, ultimately increasing data center demand. “As usage goes up significantly, there’s still a vital need for data centers. We still think it’s a very important segment,” Gray said.

Analysts at Jefferies echoed this sentiment, arguing that hyperscale cloud providers are unlikely to cut capital expenditures given the intensifying competition in AI. Tech giants such as Microsoft and Meta have also defended their aggressive AI spending, insisting that substantial investment is necessary to remain competitive.

Despite Blackstone’s confidence, its shares fell nearly 4% in afternoon trading, reflecting investor caution amid the evolving AI landscape.