Last month, a Chinese artificial intelligence startup called DeepSeek sparked a broad market sell-off in the tech world. Investors became increasingly skeptical about tech giants’ massive spending needs, questioning if AI development is possible with lower costs and less advanced hardware.
Distillation, in particular, is the underlying issue in Silicon Valley that eventually led to the entire show. The distillation process allows new AI models to quickly and cheaply learn from existing ones, having the potential to reshape the AI industry.
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That’s right, distillation can allow even a small team with virtually no resources to make an advanced AI model. While DeepSeek isn’t the one who invented this process, it did open up all its possibilities to the AI world.
“This distillation technique is just so extremely powerful and so extremely cheap, and it’s just available to anyone. We’re going to see so much competition for LLMs. That’s what’s going to happen in this new era we’re entering.”
-Databricks CEO Ali Ghodsi.
As reported by CNBC, the distillation process allowed researchers at Berkeley to recreate OpenAI’s reasoning model for $450 in 19 hours last month. In another instance, researchers at Stanford and the University of Washington created their reasoning model in just 26 minutes, and that too, by using less than $50 in compute credits. The startup Hugging Face has also managed to create OpenAI’s newest and flashiest feature, Deep Research, as part of a 24-hour coding challenge.
“Open source always wins in the tech industry. You cannot beat the momentum that a successful open-source project is able to actually generate.”
-Arvind Jain, CEO of Glean, a company that makes an AI-powered search engine for enterprises.
Even OpenAI thinks that it has been on the wrong side of history.
“Personally I think we have been on the wrong side of history here and need to figure out a different open-source strategy”.
-OpenAI CEO Sam Altman
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.
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An experienced investor staring at a wall of monitors displaying stocks and mortgaged securities.
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 60
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products. On February 25, the company announced its intent to acquire DataStax, an AI and data solution provider. The acquisition of DataStax will allow IBM to use its technology to enhance IBM’s own Watsonx portfolio of products, helping accelerate the use of AI.
The acquisition will also allow IBM to build on its commitment to open-source AI considering that DataStax is the creator of AstraDB and DataStax Enterprise, NoSQL and vector database capabilities powered by Apache Cassandra®; and Langflow, the open-source tool and community for low-code AI application development. IBM is helping clients scale generative AI and transform businesses using enterprise data, and DataStax’s tools is going to further enhance these efforts.
“Businesses cannot realize the full potential of generative AI without the right infrastructure – open-source tools and technologies that empower developers, harness unstructured data, and provide a strong foundation for AI applications. DataStax possesses deep competency in this area and shares IBM’s relentless commitment to simplifying and scaling generative AI for the enterprise.”
-Dinesh Nirmal, Senior Vice President, IBM Software.
