The markets want you to think the DeepSeek freak-out is an immediate existential threat to US tech and AI dominance. But don’t be so sure DeepSeek isn’t more of a Deep Fake from an investor’s perspective.
Recall why exactly the markets imploded Monday when DeepSeek mania began to make its way around social media on some accounts of savvy influencers like Marc Andreessen: The story goes that some hedge fund trader in China created a hyper competitive artificial intelligence platform on a shoe-string budget.
Big AI outfits are spending boatloads of money on R&D, and the chips needed to support AI infrastructure. That’s why chip-maker Nvidia has been such a market darling, and why if DeepSeek can do it better and for less, its shares tanked Monday, losing $500 billion in market value before I finished my lunch.
In the coming weeks, Wall Street tech analysts will be unspooling how the Chinese company was able to “leapfrog” US tech giants in AI. Here’s why this story is so treacherous from a standpoint if you’re betting against US AI and companies like Nvidia. The Chinese are better known for their ability to borrow stuff from the US than innovate on their own.
It’s why Trump, during his first term, engaged in the trade war after hearing complaints from big companies in the US that the cost of admission in doing business on the Mainland and with China’s massive consumer market, is sharing intellectual property with the ruling Chinese communist party.
Every China-based company is controlled by the CCP; China’s ByteDance is on the verge of selling its popular short-video app TikTok or it faces a ban from US app stores, because of the CCP.
I have no idea how DeepSeek got to where it is other than what I’m reading, and it may indeed be a miracle of the first order. It was started by a math genius hedge fund trader named Liang Wenfeng who “outsmarted” US tech giants (as a headline in the Wall Street Journal stated).
He couldn’t get those great US chips because of many reasons, including they’re very expensive, so he innovated on his home turf and came up with a better, faster AI model on the cheap.
You can see why this would signal bad things for US tech stocks if this is in fact true, and why the freakout is about to reverse itself if this story doesn’t hold.
Some Wall Street analysts and tech companies like Microsoft and OpenAI are investigating if DeepSeek is actually using technology or chips from Jensen Huang’s Nvidia in a substantial way, or if it was substantially financed by the Communist Chinese government to do so.
Noted tech analyst Dan Ives is one who doesn’t quite buy the DeepSeek rags-to-riches story. He doesn’t dispute the quality of the product, just that it’s in his opinion impossible to create something that good with a mere $6 million investment story that is being sold to the markets.
Markets are now factoring in such skepticism as witnessed by Nvidia’s Tuesday rebound along with other tech names. And if Ives is right, and there’s more to DeepSeek than meets the eyes, what just went down, will now go up even more.
A DeepSeek rep didn’t return a request for comment.
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