DeepSeek's recent breakthrough has resolved one of most pressing economic questions regarding artificial intelligence (AI): whether the worth of the AI value chain will focus on foundational models or the applications built on top of them.
This development does not just advance technical capabilities but it fundamentally changes the business of AI.
For years, investors have grappled with where to place their bets. Should they gamble on companies developing core AI models, such as OpenAI and Anthropic, or focus on the growing ecosystem of AI-powered applications? The answer lies in a simple yet critical economic dynamic: the cost and accessibility of AI infrastructure.
Consider two scenarios. In a world of expensive, proprietary AI, model providers could monopolise the market's economics, leaving little room for innovation at the application layer.
Conversely, if AI becomes commoditised and accessible, value naturally shifts toward creative applications that solve real-world problems, much like how the internet's value emerged not from the protocols but from the services built on them.
DeepSeek's advancement decisively tips the scales toward the latter scenario. Dramatic improvements in AI efficiency accelerate a trend toward democratisation that we have observed over the past two years. This shift does not just reduce costs, it alters where value accumulates in the AI stack.
The implications are far-reaching. As intelligence becomes more and more affordable, competitive advantage will derive not from access to the AI models themselves but from their thoughtful integration with domain expertise, customer workflows, and proprietary data.
This creates unprecedented opportunities for innovative applications across all industries.
However, this is not a zero-sum game. While the economics favour application developers, leading AI labs will not become obsolete. Instead, they will adapt - as we have already seen, and incorporate efficiency improvements, driving a virtuous innovation cycle. As AI becomes more affordable, its applications multiply, potentially expanding the overall market by several factors.
This growth will increase demand for computational infrastructure, benefiting hardware providers and data center operators.
The business implications are clear: investors and entrepreneurs should focus on companies that can effectively harness accessible AI to solve specific, high-value problems. The winners will not be those who merely have access to powerful models but those who can seamlessly integrate them into solutions that deliver tangible value.
DeepSeek's breakthrough signals more than technical progress and smart thinking driven by constraints. It marks a decisive shift in AI's economic landscape especially for Africa, that has been steps behind the rest of the world.
As we stumble into this reality, let us tap into our creativity and imaginatively apply ourselves toward unlocking new value. This could very much be the most significant economic realignment since cloud computing.
The writer is a venture builder and solution architect. Email:Â [email protected]
