The DeepSeek AI Bubble BURST & Market CRASH.

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 of artificial intelligence

spending in the United States 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 a lot of

people think this is very different from

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

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subscribe to the channel really

appreciate you being here and we'll see

you in the next one goodbye good luck

why not advertise these things that you

told us here I feel like nobody else

knows about this we we'll try a little

advertising and see how it goes

congratulations man you have done so

much people love you people look up to

you Kevin paffrath there financial

analyst and YouTuber meet Kevin always

great to get your take