r/stocks
US AI Companies Losing Pricing Power May Be a Key Catalyst in This Most Recent Drop
US AI firms losing pricing power to China's DeepSeek may crush forward earnings and delay profitability.
- DeepSeek's aggressive pricing is forcing US AI providers to slash prices, eroding margins.
- US firms are shifting away from expensive Silicon Valley models (OpenAI/Anthropic) to cheaper alternatives.
- Pre-IPO AI companies facing reduced pricing power will struggle to justify valuations before achieving profitability.
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Source is the South China Morning Post so take that with a grain of salt should you choose to, but the coordinating articles show Deepseek aggressively bringing down AI customer pricing at the same time as more US Firms are choosing Deepseek over OpenAI/Anthropic e.t.c. due to increasingly advantageous pricing gaps that favor Deepseek.
If these companies that are nearing their IPOs are already losing pricing power and burning cash hand over fist at current rates, that feels like there is going to be a ton of downward pressure on forward-looking earnings growth before they even have become profitable at all, and could be very painful for these companies in the near term.
Inb4 use of chinese AI products become illegal in the name of national security
Oh it's happening 100% guaranteed before the end of September. That's one of the reasons thr US govt is pushing to invest in the AI companies.
US companies arent going to use Chinese AI, but the rest of the world may. Especially if the US keeps being bullies to other countries and act more unpredictable and risky than China, it's going to happen.
US companies are 100% using Deepseek. I'm guessing my company is switching over to it soon. Every VC funded company has basically required 100% ai code support and now that we are heading into the "extract" phase of "subsidize, addict, extract" almost all of the board of every VC and many PE backed companies are looking for ways to salvage their companies that are ALMOST ebitda positive so they can exit them. Granted that's not the powerhouse of the American stock market, but they out number the powerhouses 10:1. If 10% of those small companies make it with engrained Chinese AI support, it will be very very hard to dig it out. I really feel the next 5 years is going to be a ridiculous power struggle that will influence what happens in the world for many decades afterwards depending on who wins up controlling the major ai support models, because it's REALLY getting dug in in very invisible ways: managing order goes, coding support, research, copy editing, unsexy services everyone vaguely knows happen, but they don't pay attention to and are actually quite a big chunk of bottom lines. The OPEX reduction ai offers is too rich to be walked away from, and generally, AI is best served as large infrastructure where access is a service. It's a scary situation, imho
I use deepseek v4 pro api, pretty cheap.
American tech carrying the economy from total collapse?
Grass is green and water is blue.
The overfinancialization of the economy is starving the broader market and creating a fragile, narrow-breadth environment of consolidation more like.
Don't make the mistake of thinking the stock market is the economy, the stock market is a casino - we all leverage our risk based on different values and time horizons. The stock market is just a graph of rich people's feelings, and rich people don't like the idea of a market competitor coming in and constraining their pricing power.
The recent 10-15% drop after 200-1500% YoY price increases?!?!?
Lol
That is literally a sign of weakness, yes - both from a technical standpoint on a chart and from macro liquidity and momentum exhaustion.
The articles talk about Deepseek's growing market share and aggressively low pricing. This entire market has been built on speculative forward-looking P/E projections. Aggressive pricing taking over a larger share of the market collapses those projections, which means the market comes down to compensate.
That's basics.
You're free to be the uncritical thinker who is not re-evaluating the situation in late March of 2000, someone has to be, and I salute you for your eventual sacrifice.
tbh DeepSeek V4 is very good, cheap and we do not have any quota … Just move from Claude last week and so far I do not see any reason to go back to Claude . Using it with claude code ….took 2 minutes to migrate while loosing my time for my claude quota to be reset …
I've been using Deepseek and Qwen for a while in coding and not coding tasks. These two models may not be the best, but they are actually good enought to deliver very good results that you can use in production.
With their agressive pricing I don't have any need of using other models.
Deepseek API, the cheap one, trains on your prompts and CCP will have access to all of that data permanently. I don't see how this would pass any legal checks in enterprises. Deepseek models are open weight, so US companies provide API too, but it's much more expensive, especially cache read which is the main deepseek api price advantage that makes agentic coding cheap.
US companies have been increasing API pricing the last few months, so far I don't think there's been much resistance to it.
What
US is fked.
China is an imperialist country, just like America is, and just like the European powers were before.
Europe ruled over its colonies directly. America rules over its colonies via proxy puppet states (like what collapsed in Afghanistan, Batista in Cuba, the Shah in Iran e.t.c.) where the leaders look like the people they're leading but those leaders are subservient to the colonial power's whims. China utilizes the third evolution of imperialism, economic imperialism. A country can have whatever leaders it wants, they are just indebted to China, and China doesn't care what you do so long as you pay.
China's imperialism is less bad than America's imperialism and Europe's imperialism - all imperialism is still bad. China's imperialism is also better than actively bombing the s\\t out of Africa, which America is also guilty of.