Previously in DeepSeek

Eric Newcomer captured last week’s DeepSeek drama and market reaction perfectly.
Last week, the AI industry faced a defining moment: a wave of market panic. It seemed for a moment that VCs—who had invested billions into OpenAI and other foundation model companies, like Thrive, Sequoia, and a16z—might have made a historically bad decision.
However, the panic subsided as the week went on, only to be calmed further by a Wall Street Journal report on Thursday, revealing that OpenAI was raising new funds at nearly double its current valuation.
Despite the renewed confidence, there’s still debate about DeepSeek’s true significance.While rivals admit that DeepSeek’s achievements are real, they remain skeptical.
The debate is amplified by claims that generative AI still has substantial potential, despite concerns about “scaling walls” and worries about spending and margins. Advances continue, and some argue that the “Jevons Paradox” — the idea that declining costs create a surge in demand — is now playing out in the AI space.
VC David Sacks, now serving as President Trump’s AI czar, criticized DeepSeek, suggesting that the company may have used a process called distillation to rapidly develop its tech by learning from another large language model’s answers. Joshua Kushner, a major OpenAI shareholder, also accused DeepSeek of leveraging U.S. models in its training.
Moreover, skepticism surrounds DeepSeek’s claim that it trained its model for just $6 million on a small cluster of Nvidia’s older chips. Some analysts believe that DeepSeek might have actually used a far more expensive setup of 50,000 Nvidia H100s, prompting questions about whether the company circumvented export restrictions.
Reports have surfaced that DeepSeek may have acquired its chips through middlemen in Singapore, prompting further scrutiny from the White House. President Trump even suggested that DeepSeek’s advancement could act as a motivator for U.S. companies to stay ahead, with Marc Andreessen calling it a “new Sputnik moment” for American researchers—an anxiety that could also spur innovation.
Anthropic’s Dario Amodei provided a counterpoint, arguing that while DeepSeek’s progress is noteworthy, it isn’t quite as groundbreaking as it seems. He emphasized that DeepSeek-V3 is just an expected point on the ongoing cost reduction curve for LLMs, not a fundamental shift in the economics of the technology.

OpenAI's Achievements and DeepSeek's Influence on secondary price

OpenAI has made notable moves. As previously mentioned, the company is in talks to raise a massive $40 billion round, led by SoftBank, which would value the company at $300 billion—nearly double its valuation from a Thrive Capital-led round late last year. Some of the funds will support OpenAI's Stargate project, which I reported on last week, estimated at $19 billion.
In terms of performance, OpenAI’s most expensive ChatGPT subscription tier has outpaced revenue from business team subscriptions. Paid subscribers have surged, tripling to 15.5 million last year from 5.8 million the year before. OpenAI also launched “Deep Research” over the weekend, similar to offerings from Google.
While these achievements are noteworthy, questions remain about how the ongoing DeepSeek saga could impact secondary investor sentiment toward OpenAI.

As of February 2025, we haven't seen any significant changes in OpenAI’s secondary prices, and market activity remains subdued. Secondary investors typically follow the sentiment of private investors, and for now, many are adopting a wait-and-see approach.
Looking at last year’s events, here’s how major milestones impacted secondary prices and market activity:
**February 2024: **OpenAI Approves Employee Share Sales at $86 Billion Valuation
Secondary market reaction: Prices surged, and trading volume spiked, as the deal was viewed as a strong market validation, with increased liquidity driving heightened activity.
June 2024: OpenAI Revises Equity Sale Policy to Include Current and Former Employees
Secondary market reaction: Prices remained stable, but trading volume remained high, driven by strong buying interest.
September 2024: OpenAI in Talks for $6.5 Billion Raise at $150 Billion Valuation
Secondary market reaction: Prices surged sharply, driven by investor optimism. The rally peaked in November, with heightened buy-side interest.
December 2024 – January 2025: Stability Amid Tender Offer and Market Shifts
Secondary market reaction: Prices remained stable with low trading volume. The December tender offer allowed employees to sell shares to SoftBank at $210 per share, but it didn’t significantly affect secondary pricing. In January, holiday-season lulls and rumors about DeepSeek’s competitive edge led to cautious sentiment among investors.

Perplexity's Strategic Partnerships and Merger Proposal

AI-powered search engine startup Perplexity has formed a strategic partnership with DeepSeek to integrate the DeepSeek R1 reasoning model into Perplexity’s platform. This integration will allow Perplexity Pro Search users to choose the model for web research, enhancing the search engine’s capabilities.
Additionally, Perplexity AI has submitted a revised proposal to merge with TikTok in a deal that would grant the U.S. government up to 50% ownership of the newly formed entity. The Associated Press initially reported on the new proposal, and a source confirmed the accuracy of the details to TechCrunch. The updated bid suggests a partnership between Perplexity, TikTok US, and other equity investors, with the U.S. government receiving its stake following an IPO valued at no less than $300 billion. TikTok’s parent company, ByteDance, could retain ownership as part of the agreement.

Hugging Face Takes on DeepSeek’s R1 Model

Hugging Face, a platform enabling developers to create AI models, has announced plans to reverse-engineer DeepSeek’s R1 reasoning model. The goal is to make the model available as open-source on the Hugging Face platform, providing developers with broader access to advanced AI technology.

Elon Musk’s X Teams Up with Visa to Launch X Money Account

Elon Musk’s X has partnered with Visa, the largest U.S. credit card network, to launch the X Money Account. This will allow users to seamlessly transfer funds between their traditional bank accounts and digital wallets, enabling peer-to-peer payments similar to Zelle or Venmo. This marks the first significant step for X in establishing a financial ecosystem for its platform.

Deel Raises $300 Million Through Share Buyback

Fintech startup Deel announced that it raised $300 million by selling shares owned by early investors, including the Abu Dhabi–based sovereign wealth fund Mubadala. The funding provides Deel with additional capital to fuel its growth and further its business objectives.

SailPoint Kicks Off IPO Roadshow

SailPoint, the identity security software company owned by Thoma Bravo, has officially begun its IPO roadshow, setting the tone for the tech IPO market this year. While the company is showing impressive 30% annual recurring revenue (ARR) growth, it is also facing significant losses, having burned through $250 million in the fiscal year ending January 31, 2024. Despite this, the company is pricing its IPO at 14 times ARR, which could position it among the top-tier public software firms.

Cursor’s Explosive Growth

Sacra has named Cursor the fastest-growing SaaS company of all time, with a staggering 9,900% year-over-year growth. The company has gone from $1M to $100M in ARR in just 12 months, outpacing other notable SaaS companies such as Wiz and Deel. With a customer base of 360,000 individual developers, Cursor is targeting a $105M Series B funding round, led by Thrive Capital, and now boasts a valuation of $2.5B, expanding its multiple to 25x from 20x at the time of its previous Series A round.