Because if you don't have infinite money, considering whether to buy a thing is about the ratio of price to performance, not just performance. If you can get enough performance for your needs out of a cheaper chip, you buy the cheaper chip.

The AI industry isn't pausing because DeepSeek is good enough. The industry is in an arms race to AGI. Having a more efficient method to train and use LLMs only accelerates progress, leading to more chip demand.

There is no indication that adding more compute will give AGI

Is there still evidence that more compute = better model?

Yes. Plenty of evidence.

The DeepSeek R1 model people are freaking out about, runs better with more compute because it's a chain of thoughts model.