The Rise of DeepSeek: A Macro Investing Perspective on the AI Race
Hello, fellow investors! Today, I want to dive into a topic that's shaking up the world of macro investing: the emergence of DeepSeek, a Chinese AI startup, and its impact on global tech markets. As someone who's been in the investment game for a while, I'm here to break down this development in simple terms so we can all understand the broader implications.
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What's Happening with DeepSeek?
First off, DeepSeek isn't your average startup. It's a Chinese AI company that's come out of nowhere and is now posing a significant threat to US tech giants like those in the Nasdaq 100. Just recently, the Nasdaq 100 futures took a nosedive, dropping by 330 points in mere hours. This sharp decline wasn't due to some economic report or policy change; it was because DeepSeek hit #1 on the App Store. That's right, a new player in AI technology has caused such a stir that it's directly affecting stock market indices.
Why Should We Care?
Now, you might wonder why this matters to us as investors. Here's the deal: DeepSeek's rise is a signal that the dominance of US tech companies, especially in AI, might be at risk. For years, we've seen companies like OpenAI, backed by giants like Microsoft, lead the AI charge. But DeepSeek, with a development cost of less than $10 million, is showing us that innovation isn't confined to the US. They're doing this with less advanced chips, proving that efficiency and innovation can outpace sheer computing power.
The Broader Picture
Let's zoom out for a moment. This isn't just about one company; it's about the global tech race. The US and China are in a tech cold war, and AI is one of the battlegrounds. With US export controls limiting China's access to cutting-edge technology, companies like DeepSeek have had to get creative. They're focusing on optimizing software rather than relying on hardware, which could change the game.
Investment Implications
From a macro investing standpoint, this shift has several implications:
Diversification of Tech Investments: Investors might want to look beyond the usual suspects in Silicon Valley. If AI development continues to diversify geographically, we might see new investment opportunities in Asia, particularly in China's burgeoning tech scene.
Valuation Adjustments: The valuation of big tech stocks could face pressure. We're already seeing this with the Nasdaq's reaction. If more efficient models like DeepSeek continue to emerge, the premium investors pay for established tech might decrease.
Cost Efficiency in AI: DeepSeek's model is 96% cheaper than ChatGPT. This could mean a democratization of AI technology, where smaller players or even individuals can afford to use or develop AI, potentially leading to an explosion of innovation.
Cost of OpenAI o1: $60.00 per 1M output tokens
Cost of DeepSeek R1: $2.19 per 1M output tokens
Market Dynamics: The rapid adoption of DeepSeek's app shows how quickly consumer preference can shift. As investors, keeping an eye on app rankings and user adoption rates could provide early signals of market shifts.
Looking Ahead
To wrap up, the rise of DeepSeek is a wake-up call for investors. It's a reminder that the tech landscape is ever-changing, and with AI being at the forefront of this change, staying informed is crucial. As we move forward, consider how geopolitical tensions, technological advancements, and market dynamics will influence your investment strategy. Keep an eye on companies like DeepSeek; they might just be the underdogs that redefine the tech race.
Remember, in the world of macro investing, understanding these shifts can give you the edge. So, keep learning, stay adaptable, and watch this space closely!
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