To The Moon

DeepSeek gatecrashed the AI party last night.

Taken from FinViz S&P500 map

Let us monitor the Nvidia shares closely. If the American companies are unable to come up with a proper way to challenge this small Chinese player known as deepseek, The sector will fall into this array because investors will demand a lot more returns and lowered cost.

While Nvidia may not have any close competition in the near future we do not know the developments in other companies especially those that in China. Deepseek is outperforming so many of the other players who have invested a lot more money and resources into AI and AI infrastructure

There are a few questions that need to be answered. To achieve such a lowered cost and stronger output:

1. Is this Chinese company able to secure the top chips despite the sanctions?

2. Is this company able to generate much more computing power with the older chips that are not sanctioned?

3. Is China producing chips that are able to have a stronger computation power than what is known in the market?

4. Is there a better architecture to achieve better computation power?

Let us monitor as more volatility is expected.

China’s AI threat - DeepSeek (this was extracted from my weekly preview article)

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DeepSeek seems to have created a panic moment within the biggest companies and it should alarm investors. Costs: •2,048 Nvidia H800 GPUs: $40-50million •Training: $5million If all it takes to beat OpenAI is a maximum of $55million, the industry is becoming commoditized way faster than previously expected. US-based AI companies alone will have to generate about $600 billion a year in revenue to pay for their AI hardware, according to Sequoia. The capex and R&D will likely be accepted to remain competitive given the risks of not being involved in the space, however it is getting harder by the day to envision a profitable venture in the field. Great moment for the consumer but very bad news for the companies competing in the field. - X user The Short Bear

Source: CNBC article (via knowledge_vital)

China’s DeepSeek could represent the biggest threat to US equity markets as the company seems to have built a groundbreaking AI model at an extremely low price and w/o having access to cutting-edge chips, calling into question the utility of the hundreds of billions worth of capex being poured into this industry.

Source: http://teamblind.com

Deepseek fundamentally broke the AI CAPEX narrative: Soon management of AI hype companies need to explain why there are Chinese competitors doing the same stuff at 1/10th the cost. And why we’ve spent Billions in a fast depreciating asset that may not immediately return profits - X user Marcel Munch

This would demand a review of all AI investments, applications and infrastructure. What is the level of returns, utilization and optimization? Will the investors demand more from their AI investments? Will the investors cut back on their investments in AI? This is something that could play out in the coming weeks.

My final thoughts

The AI market needs to review its investments, returns and costs. How will this affect the Magnificent 7 and the coming earnings? Are we sitting on too much excess? Do we need some fat-trimming in the AI sector?

This is an exciting time and once again, this reminds me not to ignore markets outside of America. Let us invest well.

@TigerStars

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