The stock market’s rush to dump tech stocks on DeepSeek news could be a prime buying opportunity.
Transcript:
CONWAY GITTENS: So tell me, you know, we saw a big panic in the tech sector after this low cost Chinese artificial intelligence model from DeepSeek tech emerged on the scene. Can you break down why we saw such a big sell off? And why is there such a perceived threat from DeepSeek tech?
PATRICK MOORHEAD: Yeah so first of all, any perceived risk into the bull case for Nvidia NVDA, given its appreciation of its stock, is always met with a giant sell off. And that’s what that’s what we saw here. And the fundamental thesis, or where there was perceived risk, was that a company of a few 100 people in China was able to achieve what it appeared that others took billions to invest in, like the open eyes of the world, and they spent $5.6 million to do that. So one might conclude that that means that people don’t need as much Nvidia infrastructure, or any company affiliated or in or around Nvidia, like an AMD AMD or a Broadcom AVGO or a Marvell MRVL
CONWAY GITTENS: So is what we saw an overreaction? I’m just asking that because there’s some people who are questioning whether the validity of what’s coming out of DeepSeek. We’re already hearing news that Alibaba has an AI model that beats out DeepSeek. Microsoft MSFT is weighing in that maybe the way DeepSeek obtained this was through an open AI to begin with. So where do you stand on all this?
PATRICK MOORHEAD: So where I stand on it, after putting my team and myself grinding through white papers and talking and doing channel checks is that very little has changed. If you look at the wheel of large language models and the innovations that go into it, there’s always a cost reduction effort or a cost reduction move. I don’t believe that it costs a $5.6 million to to to train this model. It takes 100 of millions of dollars to do this. And then you actually have to run the AI, which is lovingly referred to as inference. And that takes a tremendous amount of money to stand that up. So our belief is that until we get to AGI at some point in the future, for nearly every single task that we do, and this could be 5 to 10 years when you extend that to the edge and things like robotics. This infrastructure build out will continue. So and it’s also it’s it’s less about training. It’s mostly about inference. So I do believe that this was a little overdone, a lot overdone. But we’re still seeing elements of risk and fear out there, which is understandable given the run up of Nvidia.
CONWAY GITTENS: So then as an investment thesis, this sell off that we saw in tech, how do you interpret it. Buying opportunity. Does it move you into wait and see mode or do you just double down?
PATRICK MOORHEAD: I believe it’s a buying opportunity and I’ve been very consistent for the past two years. Is this this? Nothing stops this build out until investors are putting pressure on the large cap mag seven to reduce their Capex, and that’s not going to happen. So I do see it as a buying opportunity. The maybe the unknown buying opportunity might be these downstream tickers, right. The software companies, the people that actually have to deliver the eye to their companies. Again, back to Microsoft, Adobe, ServiceNow, SAP. I we believe are going to be big beneficiaries downstream. It just hasn’t clicked in yet. Of course it’s clicked in for Microsoft, but that was more related to the benefits that they’re being able to derive from open AI infrastructure and Azure AI versus a services that their end customers are buying.
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