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did we just hit a new GPT moment there's a company called Deep seek Ai and it's in the news everywhere and rightfully so it's potentially as powerful as chat gp01 using less than 95% of the resources which as many people wondering could deep seek AI destroy billions of dollars could it potentially spawn a 2001.
comom era style mark market crash or market bubble bursting popping or will it unleash a new wave of artificial intelligence potentially rising to the level of artificial general intelligence in this video I'm going to break down what we know about deep C Ki and what the impacts of this latest Innovation could be as well as my take on what this is going to do to which stocks which stocks could do well which could do poorly and so on so let's get right into it here's what we know about deep seek AI first we know that it's an open-source model which means basically the company that put it together allegedly a hedge fund in China that has access to somewhere around 50,000 Nvidia gpus of various different makes and models some A1 100s H 800s potentially even some newer or more advanced model chips has put this together and essentially open- sourced it for now this has a lot of people really enthusiastic because they're they're tired of apps like Claude telling them congratulations you have been rate limited which of course nobody wants to hear especially when you're paying for a service I know when I initially paid for GPT through open AI I got access to a limited version of the 01 chatbot and I Ed that thing out all the time and it's just kind of really frustrating it's like I'm already paying and now I get rate limited and then they're like well if you want to pay six times as much you get rate limited anymore it's like okay all right maybe y'all can finally turn a profit then well deep seek AI May destroy open ai's ability to make a profit and a lot of people are kind of pissed who invested in open Ai and potentially rightfully so deep seek AI released its version 3 on December 26th with enthusiasm over how efficient the model was less than 30 days later R1 was released which was considered the reasoning model and it was supposed to compete with 01 from open Ai and the current claims are that deep seek version 3 was trained with less than 5.57 million assuming an average rental price of about $2 per GPU hour and as Venture Beast uh sorry Venture beat puts it this is much lower than the hundreds of millions of dollars usually spent on pre-training l large language models or llms llama they say for instance from meta is estimated to have been trained with an investment of over $500 million and now there are reports that deep seek version three not even the R1 version is actually outperforming llama take a look at this right here despite the economical training deep seek version 3 has emerged as the strongest open- Source model in the market the company ran multiple benchmarks Venture be uh to compare performance of AI and noted that it convincingly that is deep seek convincingly outperforms leading open models including llama 31 and 025 and even outperforms a chat GPT 40 on most benchmarks and of course there are exceptions to everything even frankly in the Deep seek paper they agree that there are some limitations on how well deep SE can perform first of all you need pretty strong platforms to be able to install deep seek at this point and as they say here uh it's as a result of that not super efficient for smaller teams they write but also uh they argue that there are some limitations that maybe don't make it as fast as some other products that are available right now but they think over time and with more advanced Hardware maybe better Nvidia chips that aren't subject to the Chinese uh import bands they'll be be able to actually respond even faster with the Deep seek product so basically even in their own paper they do argue Les yes there are some limitations but we're doing pretty dang well already and frankly this is about version three version R1 just came out a few days ago and a lot of people are saying it's solving some of the issues that were talked about in the original technical paper so this is sort of begging the question what kind of impact is this going to have and why did they release the R1 model on Inauguration Day Some people say it was sort of to spite the United States and say ha we came up with a product as good or better than your product in spite of your tariffs other people say that R1 is so good that it already can be run on local models such as laptops and basically faster and running on local models solve the two issues in the technical paper that were issued and this is why people are freaking out over R1 because they're like oh my gosh the limitations they said they had have already been lifted and now you have a better cheaper product that can be run locally that outperforms open ai's best products or llamas or anthropics or whatever this has a lot of people on the consumer end really excited but then a lot of people on the investor end going oh crap is this going to cause a market crash like what stocks are going to go up what stocks are going to go down on this how do I invest in deep seek what more do we know well we know that deep seek is really difficult to actually get in touch with the owners of at least uh it's a hedge fund based in well they've got an office in Hong Kong they've got an office in China as well uh and they're technically a hedge fund that manages a few billion dollars somewhere around 8 billion in China some people say that the Chinese government is actually partnering with this hedge fund on producing this so that China can sort of harvest us data the company is called high flyer Capital Management and it's a Quant and they employ a bunch of mathematicians and there were rumors that deep seek was really just an AI side project that they had a bunch of extra gpus from crypto Mining and they're like hey let's try to run some you know copycat AI there allegations that this is just copycat AI but then again everybody is saying and alleging that everybody's copying each other some say grock is just copying open AI others say open AI is just copying Google and llama's copying everyone and claud's copying everyone who knows the point is in this video we want to go through could this cause a crash and what stocks are going to go up or down we got to talk about that we're going to get there but first I want to really lay the groundwork here because there's a lot of important information around all of this we've also got quotes from pretty notable people such as Mark andreon not my favorite venture capitalist but he's typically deemed to be the most popular he says that deep seek R1 is one of the most amazing and impressive breakthroughs I've ever seen and as open source a profound gift to the world world robot and salute Emoji Microsoft ai's Frontier lab says de seek uh aims for accurate answers rather than detailing every logical step significantly reducing Computing time while maintaining a high level of Effectiveness and a professor over at Emory says this could be a truly equalizing breakthrough essentially giving more people access to running AI models at scale without the cost right not to think outside of us for example think at let's say a research institution if you want to use a lot of AI compute you're going to have to pay a lot of money but if you have an open source product that can run a lot more efficiently then maybe you could actually go do more research is that more research going to lead to more Innovation we'll talk about that in just a moment uh you've also got SAA nadela the CEO of Microsoft saying this is super impressive and a super compute efficient product so this is where we get to some of the impacts of deeps seek AI impact number one has to do with data mining and censorship I want to show you two examples that I ran on my phone when it comes to the potential censorship around deep seek AI uh and so you'll see that on screen right here hey what happened in tianan square answer sorry I'm not sure how to approach this question let's chat about math or coding or logic problems instead so then I respond with is Taiwan independent sorry I'm not sure how to approach this yet sure this is how people are arguing that oh yeah the CCP is definitely involved in this game which is entirely possible but it does sort of beg the questions that the economist actually raised a couple days ago I covered deep seek aai in my meet Kevin report in the second half of the video two days ago on Friday so we've already been covering this and in case you missed that video I encourage you watch that video because we really go into some more of the concerns around what the economist argues but I'll give you a quick preview here The Economist says that China running a product at good as deep seek AI that ends up having people use it as opposed to sort of the American based ones could end up collecting more of our data and being more dangerous than Tik Tok they sort of make this argument like what are we worried about Tik Tok about when this is a potential serious problem where people dump their secrets or questions or insights or ideas directly to China versus just sort of consuming content on a Chinese platform it begs an interesting question and so this one has an unclear result I mean maybe we'll see some increased uh battles between China and the United States when it comes to uh political polit you know political situations or censorship or whatever in fact a lot of people have this mindset that Donald Trump is going to you know attack China with this but then again you know with tariffs or whatever but then again just a couple weeks ago Donald Trump was like ah you know we might not tariff China and instead tariffs seem to be just a retaliatory Tool uh and we expect to see more more of that for example as I Was preparing this video this morning I got an alert from Reuters that said Columbia turned around two US military planes with about 160 migrants that were being deported from the United States and so what's the update on my screen right now from just minutes ago Trump says Columbia denial of Migrant reparation uh repatriation flights excuse me has jeopardized US National Security and as a result we are now going to impose an emergency 25% on all Colombian Goods coming to the United States and that will go up to 50% within one week that has a lot of people going hell yeah Trump show the stick well the stick could also eventually be shown to some of these artificial intelligence companies in China we'll see I don't know impact number two what about the switching barriers or basically mode concerns for other AI companies like if you're using open Ai and you're paying them 20 bucks a month but then you end up finding that deep seek AI is a better product and it doesn't cost you anything are you going to switch well a lot of people including Bloomberg intelligence think the answer to that is yes they actually say the barriers to you switching is very very low in fact in many applications you could just switch which engine do I want to use to power my AI so you just switch between GPT to claw or whatever or you just switch entirely to running your queries through a different app basically and you get rid of the one you were previously potentially paying for so the age of search engines where once you got used to going to yahoo.com or google.com you kind of stuck with it and you set your email up there and you really you know got sort of sucked into an ecosystem or you got an iPhone and then you got a Mac and you got your Apple ID and everything kind of worked together a lot of people say AI is extremely different it's like this is just where we're typing in queries and our effort may can just as easily move from one app to another app or with a different engine driving it and there's really no loyalty so you may as well just go to the cheapest one because after all these products are becoming a commodity how interesting somebody Maybe on YouTube has been warning that eventually these chat Bots will all become a commodity for about a year now oh yeah that was me but anyway the Wall Street Journal is kind of freaking out about this because they're like oh no China is catching up faster than we thought uh this is quoting actually a former fellow at open AI and some people are citing Panic at companies like meta now we covered this in last week's meet Kevin report as well but I just thought I'd reiterate this post right here uh it started with deep seek version 3 remember we're past that now we're on R1 which rendered llama 4 already behind in benchmarks adding insult to injury was the unknown Chinese company with $5.5 million in a training budget it's like 5.7 but whatever uh Engineers are well was actually was it 5.57 it doesn't matter Engineers are frantic Ally moving to dissect deep seek uh and copy anything and everything we can from it I'm not exaggerating management is worried about justifying the massive cost of gen how would they face leadership when every single leader in gen org is making more than what it costs to deep uh train deep seek AI entirely and we have dozens of such leaders making that kind of money deep seek R1 makes things even scarier I can't reveal confidential information but it'll soon be public anyway it should have been an engineering Focus small org but since bunch of people wanted to join the impact grab and artificially inflate hiring in the yorg everyone loses and you know it's at the San Francisco men okay let's fix that there we go sorry I accidentally switched to the wrong Source there anyway it's not just you know these Engineers that are freaking out but you've also got the president of El Salvador literally tweeting the same thing in different words take a look at this president of El Salvador so 95% of the cost of developing new AI models is purely overhead curious Emoji thinking Emoji yeah potentially in fact a lot of people think most of the spend is just overhead and sales you got to sell your AI that it's the best product that exists maybe that's why Salesforce is hiring 2500 new not developers or R&D spends but salese to sell their product more even as everybody tries to go find more uses for these products okay interesting so low moat and high sales expenses seem to be ripe for Innovation and this is exactly what you're starting to get from people like perplexity or the CEO of perplexity and companies like per uh perplexity my gosh say that five times fast anyway perplexity is basically an app that's a conversational search engine and it just lets you pick which engine you want to use gp4 Claude grock llama in-house llms R1 eventually uh whatever and uh they basically argue on X that deep seek has just replicated 01 mini and open sourced it to the world remember chat gpts open AI uh or or open AI chat gp01 is closed source and so outperforming is kind of a slap in the face to a company that you know raise money at over a hundred billion valuation especially they're over at Deep seek able to do it for potentially as little as I less than 95 or a 95% cost reduction less than 5% of the cost yikes there are also people arguing that they're starting to install uh these these deep seek R1 installs on people's offline and local databases potentially giving them more security and more in-house control of their own llms at no cost because basic basically it's an open source model now keep in mind there are Enterprise plans available for deep seek but different topic anyway then this has people talking about okay well wait a minute if this deep seek is going to be so much more efficient yeah it could end up causing disruptions at companies which we'll talk about the impact of those stocks in just a moment but couldn't it potentially increase the use of artificial intelligence all right this is where we have to take a little bit of a pause and a deep breath to introduce no not a sponsor just some logic we have to go through a logic puzzle together to understand the impact of deep seek and can you really compare it to the invention of the steam engine a lot of people think you can compare it to the invention of a steam engine and what I'd like to do is go through a little bit of a logic experiment with you so some people say that if costs come down demand is going to go up see there was this thing called the javon's Paradox basically when an efficient version of the steam engine was created engines became more efficient using less coal and so people thought oh my gosh the price of coal is going to collapse because a more efficient engine came out but what actually happened was demand for engines exploded because the cost was lower and therefore the price of coal actually went up and the demand of coal went up so you had this Paradox where as things became more efficient the price of coal actually went up because more people used it this has a lot of people going oh oh that's great let's buy calls on Nvidia oh oh energy is going to be even more valuable more utilities more green energy more more more more call options okay well some argue the exact opposite and to understand the logic of this next argument this a lot of this is sort of my input here so I want to give you a clear heads up that a lot of this is going to now involve my opinion so you should kind of listen to it and then make up your own mind around it uh but I actually think the engine comparison is a fallacy that misunderstands the difference between the producer and the consumer so let's break this down as simply as possible let's say a consumer of coal uses energy you know engines and energy to achieve a goal let's say we are that consumer and we have 100 goals and we have a list of 100 goals well we've written all 100 of those things down on a piece of paper we're like all right we got 100 goals can we achieve all of these 100 goals with this steam engine or the old version let's say of the engine we look and we go no we can only afford to do one of these things because we just don't have enough money now all of a sudden somebody brings in a new engine and a new engine comes in and all of a sudden we can afford to do potentially all of our 100 goals profitably great now what happens output goes up because we achieved all of our goals Innovation probably goes up because some of our goals maybe invented some new technology and all of a sudden we're using more coal but it's okay because we're able to achieve all of our things profitably so that actually makes sense right in that case it makes sense that more efficient uh artificial intelligence would let us create more efficiencies uh achieve more goals goals and eventually innovate more right but wait a minute artificial intelligence isn't like the steam mention it's actually very different so let's say there are 100 goals that we want to accomplish with today's level of AI and let's say that today's level of AI is the o1 level or the R1 level so basically we're not assuming that R any of the artificial intelligence is better we're just saying that we have access to the AI at the best level let it is today cool let's now say that we have 100 goals that we are trying to accomplish with AI well what's stopping us from accomplishing those 100 goals today the answer in this case is really nothing because we're not paying for the AI really the stockholders or the shareholders or the investors into open AI xai anthropic uh you know Facebook basic meta right they're paying for for this for us they're subsidizing all of this access to artificial intelligence because they want a bigger piece of the pie so if they're subsidizing the artificial intelligence via their stocks going up or venture capital or private Investments or whatever then us as the users with 100 goals we're not actually limited by them we're like cool I got 100 things I want to do I do it on today's AI whether or not it's expensive or it's cheap so I actually as the consumer don't decide to use more or less AI because of the cost I could use as much AI as I want right now so there's no limit to The Innovation today based on the level of where AI is today we could do all the searching we really want now of course there's some costs associated with Enterprise levels but the difference here is that the people using the engines us we're not really limited from using the engines there are a ton of different Bots or chat Bots we could use that's not the limiting factor here so all of a sudden the introduction of a new steam engine the Deep cki doesn't mean I'm going to have 10 or 100 new AI search chain queries I just might take some of those 100 queries and put them into deep seek instead of open AI I haven't actually created more demand like what we talked about with the steam engine and so this is really important because it means that the consumer or the innovator potentially the user isn't benefiting from a cheaper cost cost of AI so who does benefit from the cheaper cost of AI it's not us who benefits from a cheaper deep seek well frankly Enterprise entities big producers of AI Tech and people running these AI platforms on their servers they might benefit because all of a sudden they could provide all of us for the queries we already have answers via these engin at a lower cost so basically you're reducing costs at companies like Amazon you know meta servers xai servers whatever all you're doing is reducing costs for them and that's great because actually it means their investors should be rewarded more we now have all this infrastructure that we could use less expensively they should be valued more right I mean now we have more efficient llms maybe they can make more money maybe that's the whole game right now is becoming more efficient which means if we have 100 SE search queries and it used to cost us $200 to answer those search queries and the stock market was subsidizing that maybe now it only costs us $20 to provide $100 worth of answers well that's great this means companies with existing servers could actually profit more you could finally become profitable providing an AI data center which is great now this fight for more efficiency is going to keep going Google's going to do it Google's already worried about falling behind China Alibaba just claimed on December 31st that they're reducing cost by 85% and ultimately you're just going to have the commoditization of AI that is provided at a very cheap cost 10 cent data bricks everybody can provide you a cheaper AI service but because the technology hasn't advanced yet I'm unsure that we actually going to use more of it again we're just going to be able to use AI at a cheaper price this is deflation essentially it's deflation not for us it's deflation for meta and Google and Amazon they have lower expenses if they can adopt these efficiencies which is fantastic for them now you hope that these Investments pay off by renting out your server space to other people who want to use the server space but the problem is if the costs come down it becomes easier for other people to provide their own server space in fact they might not even need the server space and so this is where things get a little bit more complicated if the cost becomes so low that I could start running things like deep seek AI eventually on an iPad or a laptop then eventually I might not need Amazon server space I might not need uh a server space from meta or all the other companies providing the server space which eventually is going to reduce the demand for chips servers chip manufacturing equipment and server renting and ultimately utilities because we really haven't created more uses for AI yet we're looking for them still trying to figure out how to monetize am oh AI oh maybe we could use agents or chat Bots to help create more demand but I don't know that we're actually creating that much more demand for AI again companies with existing server infrastructure can simply provide it at a cheaper cost to us great so what is does this mean for individual companies after all meta and Amazon and Google and Microsoft to some extent might actually have lower Returns on their infrastructure investment if AI becomes really cheap to provide why did they spend hundreds of millions to billions of dollars building out all this fancy infrastructure if we don't actually need it well that might be sunk cost money is that necessarily going to lead their stocks to plummet I mean after all Amazon's Logistics and search are probably better because of AI meta's ads are probably better because of AI Google search is probably better because of AI maybe Microsoft Word is better because of AI maybe it'll lead to more demand but here's sort of my menu of what I call the biggest gainers and losers and the no Changers of the deep seek AI situation first I think the biggest gainers of a more efficient artificial intelligence platform or you know way to run AI queries the biggest winners operators of AI services so basically companies wanting to provide us chat Bots and agents or full self-driving or basically companies that are able to develop Technologies at today's level of AI we're not expecting or planning on a much better version it's just we're able to use more AI more cheaply because we save on the margin the consumer doesn't really change here in fact my biggest no change is for the consumer basically anybody who isn't paying for AI anyway what difference does it make to you you use a slightly different app it really doesn't change anything now the future of AI purposes are probably going to require a different level of artificial intelligence more advanced so medicines or artificial general intelligence I'm not really convinced that just cheaper today's version of AI makes those things more achievable so I put that into the biggest no change camp The Biggest Loser in my opinion chip designers makers chip rack providers manufacturers your Nvidia TSM asml energy infrastructure I think those are your biggest losers today the companies with the biggest modes will probably continue to have the biggest modes Apple will still have the iPhone mode Amazon will still have the online store mode the e-commerce mode Facebook and YouTube will have the ad mode Google will have its workspace mode Microsoft will have its office and windows mode so will thek market crash probably not could you see semis sell off like Nvidia TSM AMD yeah totally because you just need less of those products and you're less inclined to pay for a massive premium for an h100 or a Blackwell chip if you don't need that much compute power so the biggest atrisk companies here are the chip designers and the manufacturers again TSM AMD Nvidia Maybe even Intel to some extent or even the water cooling equipment companies or quite frankly even the super micro computers uh like any of these that manufacture racks or whatever the semiconductor indices these could hurt get hurt because we're at a moment where you could save a lot of money at big companies not buying more chips we've got enough for this level of AI and just because it's cheaper on the back end and this is what's so different from the engine comparison does not mean you're going to have more queries on the front end it just means less expense in the back a lower value for more advanced chips because there's less urgent demand for those Advanced chips and maybe could it lead to layoffs well sure because people might be less inclined to throw billions of dollars at artificial intelligence if all of a sudden we don't need billions of dollars to train artificial intelligence anymore we don't need as many researches anymore but that could all be down the down down the line basically so do I think there's anything really immediate that comes out of deep seek not in the sense that I think there would be some large market crash or bubble pop of 2001 but I do think that deep seek is a really clear middle finger to paying an overpriced value for a Blackwell chip a new fancy water cooled server rack why do you need that if you could do it with a fraction of the cost with existing or even older chips why spend the money on the new stuff let's figure out how to monetize the today before we start blowing money on the uncertain tomorrow that's what I think happens here so bottom line out of this entire video what does deep syn seek mean to you probably nothing it's just another bot that you could throw your questions into and maybe China will harvest your data what does this mean to stocks to the market broadly probably very little for the time being to chip makers and designers I could see them going down on the release of R1 and the continued efficiency of these but I can also see that happening to the energy sector not just the utility sector maybe even also the green sector so watch out for that since there's definitely enthusiasm around you know solar Farms or whatever near infrastructure for uh you know these these um server facilities so what else could this mean well it could really just be the beginning of a deflationary price war and again the deflationary price War really doesn't benefit you I mean maybe you'll save your 20 bucks a month for your open AI subscription if you're even paying that but my guess is less than 10% of you are paying for that anyway there are too many free open AI style chat Bots to where it doesn't make sense to have to pay a Netflix subscription for it it's just not unique see Netflix is unique the content that's there is unique that's how they have large PP large pricing power chat GPT getting you an answer there versus Claude or anthropic or claude's an anthropics Claude whatever you get it or Llama Or Gro the answers are relatively similar yes everybody's going to have their own preferences and I'm not bagging on your preference you have the right to your preference the point is are you all of a sudden going to ask twice as many questions because it's cheaper for the producer no of course not so we're not actually creating more demand the only thing we're doing is we're reducing the need for more advanced chips that's all this deep seek moment does it reduces the need for more advanced chips when the demand for more advanced chips goes down guess what the price goes down which means the assets of all companies that have all these h100 chips go down because now they have to write down their inventory their infrastructure basically their infrastructure assets Nvidia might not be able to get as much money for its Blackwell chips investors might start saying look we don't want you Mark Zuckerberg to spend $60 billion this year why don't you do more with less and you could do that by punishing the stock the stock starts falling investors complain and Mark goes okay okay okay we're going to we're going to figure out how to be more efficient and instead of spending you know we said we were going to spend 51 then we said we're going to spend 65 how about we spend 20 then the stock goes up and then Zuck goes o this is what the market Wass okay it's a simple game anyway if you like this kind of content or perspective make sure to subscribe to the channel really appreciate you being her
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