MediaTek CEO Says DeepSeek Will Boost Chipmakers Despite Tech Stock Volatility

Key Takeaways

• The release of DeepSeek R1 last month sparked significant market volatility.
• However, MediaTek CEO Rick Tsai is unfazed by the Chinese AI breakthrough
• Like others in the space, Tsai argued that in the long term, increased hardware efficiency will actually boost chip sales.

Major chipmakers have been among the worst affected by market volatility that has swept across the tech sector since DeepSeek upended assumptions about the direction of AI development.

But in a quarterly earnings call on Friday. Feb. 7, MediaTek CEO Rick Tsai sought to reassure investors, arguing that the Chinese AI breakthrough would actually increase demand for semiconductors in the long run.

DeepSeek Volatility

After DeepSeek R1 was released, market volatility started with Nvidia, which lost more than $500 billion from its valuation in a single day on Monday, Feb. 3.

In the days following, Arm, AMD, and Qualcomm all experienced significant selloffs after they reported below-expected quarterly sales and growth forecasts.

Concerns about sluggish AI growth were exacerbated by Big Tech earnings, with Google and Amazon among those that underperformed in the cloud and high-performance computing segment.

However, according to the CEO of Taiwan’s MediaTek, the recent market shock doesn’t undermine the sector’s long-term growth prospects.

MediaTek Unfazed

“In the mid-to-long-term, the trend of ubiquitous AI continues to unfold more market opportunities,” Tsai remarked on Friday.

He said recently released models including DeepSeek R1 and Alibaba’s Qwen 2.5 Max showcase the major efficiency gains on offer from open-source AI.

Together with Llama and other open-source models, we believe the trend will democratize AI and accelerate AI penetration,” Tsai added.

“We are positive on these developments and firmly believe MediaTek has the right technologies to benefit from the AI democratization trend, both at the edge and in the cloud.”

Long-Term Prospects for Chipmakers

Tsai’s logic could also be extended to other chipmakers. In the wake of DeepSeek’s hardware efficiency leap, some economists have argued that AI may turn out to be a case of “Jevons paradox ”—a phenomenon whereby demand for a resource increases when it becomes more efficient to use.

This argument was echoed by JP Morgan analysts in a recent report that asked whether increased adoption would be enough to offset reduced spending due to efficiency gains.

In the worst-case scenario, the analysts predicted that DeepSeek could prompt a 24% reduction in capital expenditure by hyperscalears over the next two years. This would put as much as $37.5 billion of chipmakers’ future revenue at risk.

However, they noted that “our view is slightly more upbeat.”

Drawing a parallel between the rise of x86 virtualization in the mid-2000s, the report pointed out that despite massively increasing hardware efficiency, the technology actually boosted chip sales by driving the transition to cloud computing.

For Nvidia, MediaTek and others, future sales growth rests on the latest AI development following the same path x86 virtualization and prompting accelerated adoption by opening up new markets and use cases.