The lower processing costs associated with DeepSeek's models will only drive more customers to use their data centers, CEOs of Digital Realty Trust Inc. and Equinix Inc. said in recent earnings calls after analysts questioned them on what the Chinese company's alleged breakthrough in AI meant for the digital infrastructure sector.
"This shift will drive higher and higher AI utilization to more and more customers, ultimately creating more and more demand for our facilities," Digital Realty CEO Andy Power said Thursday.
Equinix CEO Adaire Fox-Martin made similar remarks when asked about the implications of DeepSeek's AI products for the data center industry.
"The drop in inferencing costs that's implied by the work released into the open source market by DeepSeek I think will enable the economics of AI transformations to become a little bit more feasible for a broader set of organizations," Fox-Martin said Wednesday. "That's why we feel that this will represent a circular demand driver for our business."
The CEOs were discussing their financial results for the fourth quarter of 2024.
Questions about DeepSeek's impact on the need for data centers in the U.S. arose across the industry after the startup's team made waves in the corporate world after claiming in a research paper that the company's system used far fewer computer chips than what leading AI companies in the U.S. use to train their language-based models.
The claims raised questions about how much computing power is really necessary to train AI models that make predictions based on inputted data, also known as inference models. Some of the biggest announcements in the data center space in the last year involve plans to build billion-dollar facilities to meet demand for digital infrastructure to support the AI boom.
Digital Realty's and Equinix's stock values dropped immediately after market players learned about DeepSeek's research paper in late January. Digital Realty's stock has since crawled back up slightly, while Equinix's share price has largely returned to what it was before the news broke.
Both CEOs described 2024 as being particularly strong for their companies. Power said Digital Realty had record-high levels of lease renewals last year, and Fox-Martin said Equinix signed a record number of new contracts with customers paying for their services.
Top brass at Blackstone Inc. and KKR & Co. Inc also told analysts during their earnings calls that the news about DeepSeek hasn't changed their bullish positions on data centers. Executives of both investment giants said they don't build data centers "speculatively."
--Additional reporting by Georgia Kromrei. Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.