🍔Tech Crash by DeepSeek - Why We're Still Bullish

Which stocks are facing an existential threat?

We called it again! We wrote last week that the market was going to stall out. You can read that post to see exactly how we came to that conclusion. On Monday, DeepSeek caused a crash in all of the major AI tech firms including Mag 7.

Analysts are comparing this to the Dot-Com moment in 2000 as internet businesses collapsed. We’re here to tell you this is not the same case; in fact, US tech firms can still continue to thrive in this environment. Read on to find out which stocks to buy.

This is a special edition deep dive into DeepSeek and how it affects the US markets. All equity investors should be paying attention because the SPX and QQQ indexes are heavily concentrated in overvalued AI names. Could there be an existential threat on the horizon?

DeepSeek - The new AI in town

First off, what is DeepSeek? DeepSeek is an emerging AI language model developed by a Chinese startup founded just two years ago. It grabbed headlines recently by topping the Apple App Store charts shortly after its US launch. Importantly, its capabilities rival established models like ChatGPT, but at a fraction of the cost — reportedly $6M compared to the billions spent by the likes of OpenAI, Google, and Meta.

The novel technology works by shrinking larger models, being more selective in the data it uses, and using self-learning techniques. Efficiency was crucial due to the US’ chip export ban. DeepSeek is a strong contender and a very disruptive technology that will lead to price deflation.

This is a revolutionary announcement for several reasons. For one, it challenges the notion that US leads in AI development. China has always been extremely proficient at software and has a good track record in building AI. Secondly, it’s open source so it’s widely accessible and developers can freely access and improve it, further suppressing costs.

But the main reason it led to a meltdown in Nvidia stock (-17% in one day) is it calls into question the billions of dollars that tech firms have spent on compute power. Nothing worse than spending tons of money on something others can replicate cheaply or for free.

Debunking FALSE facts

With this announcement, investors are questioning the need for all the AI infrastructure built over the past few years. What’s the point of expensive Nvidia GPUs if AI can be built without it? Should US tech stocks be valued so highly if they no longer have the technical edge?

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• AI will be a lot cheaper

• More chip demand?

• Which Mag 7 will remain magnificent?

• Whale in the room: NVDA

• End goal of AI