What is DeepSeek? Why did it tank the US market?
Welcome to AI Collision ๐ฅ,
In todayโs collision between AI and our world:
- China tanks the US market in a weekend
- What does this mean for AI stocks?
- Glow duck finds his man
If thatโs enough to get the US market tanking, read onโฆ
AI Collision ๐ฅ
Meet DeepSeek… the Chinese AI that just wiped a trillion dollars or so off the US market.
This is, AI from China. And as it proudly claims,
Just as a word of caution, if you had qualms about handing over your data to Big Tech in the US, probably worth checking out the DeepSeek Privacy Policy. But if you’re not as keen on reading it as I am, here’s two key points to consider,
- When you use our Services, we may collect your text or audio input, prompt, uploaded files, feedback, chat history, or other content that you provide to our model and Services.
- We collect certain device and network connection information when you access the Service. This information includes your device model, operating system, keystroke patterns or rhythms, IP address, and system language.
The thing that weirds me out there is keystroke patterns or rhythms. For what it’s worth, I checked out the same policies on ChatGPT, and it also collects network and devices information, but there’s nothing to be found about keystroke patterns or rhythms.
Take that as you will, but that does feel a little extra pervasive.
Anyway, if you don’t want to use it, but you’re technical of mind, head here to check out all its API documents. But if that’s not your thing, which for most people it’s not, here’s the lowdown on why this Chinese AI to “rival OpenAI” just wiped trillions off the US markets.
- DeepSeek is going all in on claiming it only cost them $5.5 million to train and reach this latest breakthrough in its AI. The CEO has moved from posting deep technical papers and information to memes. $5.5 million in H100 GPUs equates to (at most) a couple of hundred of the Nvidia chips. And claims it has utilised the even lesser powerful A100 GPUs. Of course, why on earth would any of us have any reason to think DeepSeek might be lying…? Itโs not like China has lied to the world ever before, is it…
- Of course, taking this extraordinary claim on face value would mean the hundreds of billions of dollars the likes of Meta, Alphabet, Microsoft, Nvidia (and others) have spent on scaling AI was an utter waste of capital and time.
- It also means the “fears” from Wall St about the payback and return on investment for all this huge AI capital expenditure (capex) are coming true all at once and that US companies will never be able to get a commercial return on AI.
- In turn, because China released an AI that’s as good as US AI on a much tighter budget and far less computer โ all tech stocks decided to tank lower, being led by Nvidia which shed 17% of its value in one swift move. The daily volume in Nvidia alone was around $100 billion. It melted off over $500 billion in market cap. That smashed everything (except Apple).
So, what does this really mean for the “Mag 7” stocks, Nvidia, Microsoft, Meta, Alphabet, Amazon, Tesla and Apple? Well for Apple, not that much. For once it pays to be a laggard with this stuff. As Apple really isn’t that big in AI (yet) this doesn’t really impact them. In fact, to give you an example of how little this matters to Apple, and also how bad Apple’s AI currently is, just look at this:
Actually, come to think of it… long term it doesn’t really impact any of the Mag 7. Thinking about it even more, China has delivered the greatest gift to AI investors since Japan’s unwinding of the carry trade.
China just made AI stocks (and anything even related to AI stocks โ like bitcoin miners and SMR nuclear tech companies) anywhere from 10% to 20% cheaper.
For me, right now is another great buying opportunity for companies that will lead AI over the next decade.
How on earth could I possibly say this?
Well, I’m going to explain with a meme.
Also, I don’t trust a word that’s coming out of DeepSeek right now.
$5.5 million my backside. There are multiple sources saying the reality is DeepSeek was likely trained on anywhere from 50,000 to 200,000 H100 GPUs. That’s not wildly different from the big US AI players.
And let me reinforce this point: if AI does get cheaper, then what’s going to happen is that it will come at us faster than first expected. Furthermore, Meta, Amazon, xAI, all the US AI companies, will simply be able to ramp up the output of their AI on the same hardware they have now and exponentially scale it up with plans they’ve got to add even more computer to their data centres.
In short, should you be worried about any of this? In my view, not one bit. This is a timeline accelerator, meaning demand will lift, Nvidia will still remain the main player, and companies like Meta, Amazon, Alphabet and Microsoft won’t scale back the investment โ they’ll keep ramping it up but just getting way more bang for their buck.
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Boomers & Busters ๐ฐ
AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).
Boom ๐
- Lantern Pharma (NASDAQ:LTRN) up 24%
- Brainchip (ASX:BRN) up 18%
- Predictive Oncology (NASDAQ:POAI) up 14%
Bust ๐
- Vertiv Holdings (NYSE:VRT) down 24%
- Nvidia (NASDAQ:NVDA) down 14%
- Broadcom (NASDAQ:AVGO) down 15%
From the hive mind ๐ง
- President Trump has his say on DeepSeek, and he’s not critical (at least not publicly) but affirming it’s a wakeup call to US companies to be competitive. Although I suspect that behind closed doors he wants to know how the Nvidia chips got around the export controls.
- You can’t tell me Zuckerberg and Meta didn’t know about DeepSeek. And if they did, and they still are going to ramp up AI to millions of chips… well, get ready for AI in your life everywhere.
- Meanwhile… Trump’s tariff programme is going to see a lot more investment in the US. Particularly when it comes to making AI chips.
Artificial Polltelligence ๐ณ๏ธ
I’m told our polling isn’t far away from getting fixed so again, until it is, it’s a good old fashioned question and comment button…
Is DeepSeek a Chinese psyops (psychological operation) play? Or is it a genuine threat to US AI dominance?
Weirdest AI image of the day
The AI videos are getting really good and also increasingly random and hilarious. Here’s one I found quite amusing.
ChatGPTโs random quote of the day
Computers are like Old Testament gods; lots of rules and no mercy.
โ Joseph Campbell
Thanks for reading, and donโt forget to leave comments and questions below,
Sam Volkering
Editor-in-Chief
AI Collision
Excellent and most useful comment and thinking as usual Sam
Thank you ๐
Sam, another lesson forgotten. American spends $20.000000 developing a pen that works in space. Russia uses a pencil. Sometimes less is more.
Bravo Sam, this really good stuff presented in an interesting way.
Best regards
Thanks ๐
Hmm, AI monitoring keypad strokes and rythms is a way of figuring out passwords possibly? A cyber security chap told me recently that keypads strokes and rythms, when being used to enter passwords is a method already being used in some arenas to ensure the person inputting the password is legit.
Good article BTW – keep up the good work.
Also thanks ๐ I do find it interesting about the rhythms thing, I don’t believe it’s to hack someone like you or me, but I do believe it gives the CCP (and lets be honest, there’s a good chance they’ll be tapping into this) a level up in understanding how Western culture functions and probably helps PLA Unit 61398
I thought this โdeep seekโ thing sounded a bit dodgy??!! ๐ so thank you Sam! ๐
Yeah I’m going to pass on it.
Also main investor of Deepseek is a major hedge fund owner. Chinese companies unable to short companies in China, however would not stop him shorting US stocks. Just saying would be interesting to see if he or any of his close allies took advantage earning billions, probably enough to pay for Deepseek!!
Key pad stroke and rhythms were used to identify morse code operators in past conflicts.