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DeepSeek, a new generative AI model based in China, has thrown a wrench into the well-funded ecosystem in Silicon Valley — and it could have significant implications for the travel industry.
The startup claims its tech rivals that of competitors OpenAI and Google — investor Marc Andreessen said the tech is “one of the most amazing and impressive breakthroughs” he has seen. And, DeepSeek said it accomplished this at only a fraction of the cost compared to its competitors.
AI stocks dropped as a result: Nvidia, which makes heavy duty computer chips to power AI models, lost $589 billion market cap on Monday. Tech-heavy Nasdaq fell 3.1%. There was a significant recovery on Tuesday, but questions about the repercussions remain.
As Silicon Valley stakeholders panic at the potential change in the competitive landscape, travel companies working to adopt AI could be the winners in the long run. That’s because if the tech is cheaper to produce, then it may not be as expensive for companies to integrate.
“If DeepSeek lowers the cost for travel companies, that can only be good,” Richard Clarke, senior analyst for Bernstein, said in an email to Skift.
It also raises the question once again about how online travel agencies will fare in the age of AI.
An Upside for Online Travel Agencies?
As industry leaders have been saying, AI development could at least change the way that online travel agencies secure traffic and generate revenue. Some believe that the tech could evolve to circumvent online travel agencies entirely.
OpenAI, however, last week announced partnerships with Booking Holdings, Tripadvisor, and Uber — showing a collaborative approach at least in the short-term. Startup competitor Perplexity also announced a partnership with Tripadvisor.
A new strong AI competitor, likely with its own goals to offer quality trip planning capabilities, could lead to more travel partnerships and competition across the board in the short term.
But if the future tech does drive traffic away from online travel agencies, then suppliers might reap the advantage because of more sales directly to consumers. On the other hand, perhaps AI trip-planning agents will come to dominate travel the way Google Search has done.
Cost Accessibility for Developers
The high cost of using generative AI models to streamline operations or to develop their own trip-planning chatbots has been a deterrent for some companies.
Amex GBT has had to be mindful as it continues to experiment with integrating AI throughout the company, according to Marilyn Markham, the business travel agency’s vice president of engineering and AI strategy.
“That’s mainly the reason why some of the [proofs of concept] did not succeed. It was not that it wasn’t able to do the job. It was because it was too expensive at our scale,” Markham told Skift in November.
Amex GBT is one of the biggest travel companies in the world. Other companies, with smaller budgets, could have a tougher time funding AI adoption.
If DeepSeek can provide consistently advancing AI tech at a lower cost, then more small and large travel players could jump on the bandwagon. That could, in turn, drive down AI costs across the board.
DeepSeek Travel Capabilities
So far, the trip planning capabilities in DeepSeek aren’t great, but that goes for all of the platforms right now. But DeepSeek is starting out with the ability to search the web in real time, something ChatGPT released only recently.
A quick test shows that DeepSeek, which soared to be the top downloaded iPhone app, doesn’t really work for finding flights, but it worked surprisingly well to search the web for events.
Unlike OpenAI, there are no obvious integrations with travel companies at this stage.
If the cost to develop DeepSeek’s tech really is that low, then it shouldn’t be long for advancements. There is skepticism, however, about how low the cost actually is and what made that possible.
TikTok All Over Again?
The nature of an AI search engine like DeepSeek means it’s constantly collecting large swaths of data from users.
The fact that DeepSeek is a Chinese company could be cause for privacy and security concerns, opening the door for regulatory scrutiny in the U.S. and the EU. China-based TikTok has been ordered to sell its U.S. operations by April 4 because of such concerns.
That could mean regulatory pushback if large travel companies seek to partner with DeepSeek. DeepSeek’s emergence could also be an advantage for China-based Trip.com Group, one of the world’s largest online travel agencies.
