DeepSeek
This latest technology comes from China, and of course, it’s taken a toll on US technology stocks.
I am reminded, though, that China over the years have said things that are not true, and many in the technology space wonder how they could really do this for 10,000 chips and $6 million. It is shocking to us that this cost $6 million, meanwhile US tech companies are spending billions for AI infrastructure so something isn’t quite adding up. Its as if they discovered a cure for cancer with limited resources. Possible, but not likely.
Also, there is a concern of putting this app on your phone or some laptop device, while they’re in there mining your data, and you’re getting for so-called ‘free’.
We are looking forward to hear from some of the big tech giants, which are reporting earnings this week, and they may have comment on this as well to give some more clarity on how this may affect them, or not affect them.
We do understand that innovation and competition is going to happen, and China’s AI is ahead of what we initially had thought. So this may compress margins for some of the semi conductors. Whether this technology is available now or not is yet to be determined, and the bias is towards ‘its China’ and cant be fully trusted, but it seems reasonable that semiconductors and other AI support, may see the margins come down and that’s what the market is reacting to right now.
Nvidia is pretty much sold out for the next two year the Blackwell and other chips, Microsoft will be spending $80 billion, Meta will be spending $60-$65 billion, so this is clearly not late innings and this is still very early innings, and it shows a competition will not only come from China, but perhaps will come from Japan, and other parts of the world, and that is more or less the wake up call happening today – that most US companies had a pretty big lead in technology, and they probably still do, but reinforces that innovation disrupts, and that innovation breeds more innovation and competition, which is now disrupting US markets. The opportunity as an investor is to watch for some of these outsized or overreactions and try to take advantage of them with a longer term horizon, and possibly buy some ugly today to plant those seeds for the future.
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