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Reporting quarterly earnings Wednesday afternoon, it will be tough for Microsoft to avoid the issue of the AI breakthroughs from China's DeepSeek that are shaking up the tech world and the stock market this week.

"Investing 'very heavily' in capital expenditure and infrastructure is going to be a strategic advantage over time," Mark Zuckerberg said.

Distilled R1 models can now run locally on Copilot Plus PCs, starting with Qualcomm Snapdragon X first and Intel chips later. This brings a lot more AI capabilities to Windows, and it’s something Microsoft was already working on with its Phi Silica language models.

Microsoft MSFT.O has made Chinese startup DeepSeek's R1 artificial intelligence model available on its Azure cloud computing platform and GitHub tool for developers, the U.S. company said on Wednesday. The AI model will be available in the model catalog on the platforms and will join more than 1,800 models that Microsoft is offering.

DeepSeek’s success initially rattled investors’ assumptions about the AI spending wave that has swept Silicon Valley in recent years.

Nvidia (NVDA 8.93%) has soared over the last two years, thanks to its dominance in artificial intelligence (AI) -- a market set to reach $1 trillion by the end of the decade from