Every week NAND Research puts out a newsletter for our industry customers. Below is a excerpt from this week’s, February 4, 2025.

Driving the Week

This week we’re joining several thousand Dynatrace customers in Las Vegas for its annual Perform event where the focus will be on the intersection of AI and observability.

It’s also a big tech earnings week. Numbers are expected from Palantir, NXP Semi, ONSemi, and Super Micro on Monday, followed by Alphabet and AMD Tuesday. Wednesday sees Alibaba, Qualcomm, and Arm. Finally, Thursday brings us Amazon, Fortinet, Cloudflare, and OpenText.

We’re very interested to see the cloud numbers from Alphabet and Amazon following last week’s slower than expected cloud numbers from Microsoft. Stay tuned.

DeepSeek Fallout

It’s an understatement to say that the tech world was rocked by news early last week that Chinese AI company DeepSeek trained a large language model, DeepSeek R1, that’s nearly as good as any other at a fraction of the cost, a reported $6M in training costs.

The fallout was immediate, with Nvidia suffering the largest single-day drop in market cap in Wall Street history.

Let’s set aside the politics of the the DeepSeek model and focus on the implications to IT infrastructure.

Our take on this is simple: scarcity drives innovation. Somebody was going to optimize for training costs, it just happened to be DeepSeek. This isn’t a bad thing (unless, maybe, you’re OpenAI), as, if DeepSeek’s processes can be replicated, it promises to democratize LLM training.

This has the potential to open a broad market for training, putting in the hands of even modest enterprises, and making it practical for on-prem deployments. That’s our thesis, which we published on Forbes.

DeepSeek’s numbers are already be questioned, with the nearly always-accurate Dylan Patel over at SemiAnalysis pointing out that while DeepSeek’s actual training run might have only cost a few million dollars, it comes on the heels of about $1.6 billion in CapEx spend for the company. It also doesn’t include all of the R&D expense that it took to get to that training run. Like many things in life, it’s all about how you count. Anyone following DeepSeek should read the SemiAnalysis piece, DeepSeek Debates: Chinese Leadership On Cost, True Training Cost, Closed Model Margin Impacts.

Here’s a few interesting quck-takes on DeepSeek:

The Financial Times says: The Real DeepSeek revelation: The market doesn’t understand AI.

Bloomberg reports that OpenAI leader Sam Altman Praises DeepSeek R1 and Promises More from OpenAI.

Meanwhile, OpenAI and DeepSeek competitor Anthrophic’s CEO Dario Amodei said in his blog that he’s much less impressed.

Policy Watch

We’ll refrain from commenting on the “will they or won’t they” US tariffs against Canada and Mexico until there’s more clarity on what’s happening, and instead focus on more tangible issues, like some looming anti-trust.

A late-arriving suit from the DOJ to block HPE’s long-awaited $14B acquisition of Juniper keeps the deal stalled a little longer, as regulators claim that the combined entity would “reduce competition and weaken innovation.” 

For its part, HPE responded that it “believes the Department of Justice’s analysis of this acquisition is fundamentally flawed.” It also noted that the transaction has been approved by antitrust regulators in 14 jurisdictions, including the usually harsh anti-trust watchdogs in the European Commission and the U.K.

Cisco will be the big winner should the government prevail. Everyone’s watching this one closely, and we’ll have our own analysis on the situation up shortly.

Continuing its advocacy for the “right to repair,” the US FTC is suing John Deere over repair restrictions. This story started back in 2017 when the state of Nebraska introduced legislation targeting the equipment maker that would force it to allow its customers the freedom to repair products outside its dealer networks. Other states have since followed suit, and the DOJ put a memo in 2023 supporting farmers in their case against Deere.

This is about far more than just tractors. The right to repair impacts closed systems throughout the tech industry, with the EU successfully pushing Apple to similarly open repairs on its closed phones and tablets.

Transitions

Same job, same industry, new team: Recently departed Weka CRO Jeff Giannetti joins former competitor Hammerspace as its first chief revenue officer. Giannetti’s well-qualified, with deep experience at Cleversafe, Sun, Veeam, and even spent a decade NetApp. This is a nice hire for Hammerspace.

NetApp has a new CFO, tapping former Western Digital CFO Wissam Jabre for the job. Jabre is replacing Mike Berry, who previously announced his retirement, in the role.

HPE named Maeve Culloty as EVP for HPE and President & CEO of HPE Financial Services. Culloty has been with HPE since 2007 in escalating roles.

Pat Gelsinger Sighting: The former Intel leader hasn’t taken on a new job, but he has surfaced as a seed investor in UK chip start-up Fractal.ai. The company is reportedly developing chips that leverage in-memory compute technology.

What We’re Reading

The Information recently published its opinion on why Marvell Will Overtake Broadcom as Nvidia’s AI Challenger. The entire piece is worth the read, but here’s a key excerpt that will resonate with Broadcom’s VMware customers:

“Marvell has quickly become a force [in custom AI silicon], snaring Amazon as a customer, among others—including, many speculate, Microsoft.\

One reason is that Broadcom is a difficult company to deal with—it alienated Amazon and others. Amazon used to be a big customer of Broadcom, but that has changed in recent years, thanks to Hock Tan’s hardball negotiating tactics… those tactics include surprise price hikes, that story said. Amazon now works with Marvell on custom chips.

And Marvell even has a shot at winning over Google, Broadcom’s best-known custom AI chip customer. The Information reported last year that Google executives were mulling switching from Broadcom to Marvell for some of its custom AI chips as soon as 2027 to lower costs. This was also in response to a Broadcom price hike.”

Finally, we’ve read a lot of articles about people falling in love with their AI chatbots, but here’s a story from Airmail.news about a “wealthy French divorcée’” who lost more than $850,000 to a scammer who used deepfakes to convince her she was helping actor Brad Pitt through his kidney cancer treatments (which, as far as anyone knows, Brad Pitt isn’t going throught). The piece, From Brad to Worse, is an interesting read that should remind us all to be careful out there.

Companies mentioned: Anthropic, Apple, Broadcom, DeepSeek, Fractal ai, John Deere, Hammerspace, HPE, Juniper, Marvell, NetApp, OpenAI, VMware