Why the Market is actually *Crashing* on DeepSeek AI

oh boy the US economy just walked into

the Wilderness sculled with all of its

GDP oh man what do that mean for us why

is it happening and is this going to be

a buy the dip opportunity I'll let you

know in this video especially since this

is fed week and we've got a lot to

buckle up on so let's get started with

well first of all I'm going to take this

sip of coffee but then I want you to

know why why all of a sudden did the

NASDAQ now it's recovered a little bit

but in pre-market drop one essentially

the entire Market sold off $ 1.2

trillion do of market capitalization

3.4% here on the NASDAQ it was even

lower just a few minutes ago Tesla is

down 3% and if you look at Nvidia it's

down

11.56% in the pre-market what is going

on and why is Apple only down one qu of

a percent well all of it can be

explained and that's what we're going to

do in this video in this am edition of

the me Kevin report news that makes new

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money all right what's going on well

listen look yesterday and uh on Friday I

made videos covering the Deep seek story

that is exactly what's going on and in

this video I'm not going to reiterate to

you how basically there is a new

artificial intelligence model that

allegedly can perform as well as some of

the best quality versions of chat Bots

from uh Facebook b or uh open AI you

know competitor to GPT with a fraction

of the training expense potentially as

little as 95% or as much as 95% less uh

actual compute or training expense to

have similar results now a lot of people

are saying I don't know there's

something sus about the Chinese they're

lying to us but the problem is the code

for this AI is open source so every

hedge fund and institution well they can

express Jade on the internet you know

they're downloading the app in the app

store which is now number one in the app

store they're going to deep seek and

they're making burner accounts and

they're testing it they're running it

against the money the hundreds of

millions hundreds of I'm sorry billions

of dollars that are being spent on

compute every single year just for

artificial intelligence models that now

China is putting to shame consider this

for a moment just to train a traditional

model usually takes somewhere around

half a billion that's the train one

model that they just did the Chinese via

deep sea allegedly for less than

$5.6

million that means we're spending a lot

of unnecessary Brute Force money on

artificial intelligence chips and server

centers but it's not just that money I

mean consider the first half of last

year we spent

about 200 I'm sorry we spent about $120

billion on artificial intelligence and

artificial offal intelligence related we

think that by the end of the year our US

economy probably spent about2 200 to

$225 billion on artificial intelligence

uh and that's just really on like chip

making Investments right now you might

not think okay well I mean come on Kevin

we have a $23 trillion economy that's

you know maybe 1% of our economy why

does that matter well there are a few

reasons that spending matters number one

has to do with the velocity of money so

this is an old economic principle that

basically says when one person spends a

dollar and it goes into the economy it

Cycles through the economy and actually

generates spending between three3

to4 for every dollar that is spent and

there are different types of velocity of

money right so when you put your money

in a savings account the velocity of

money is closer to one when you go spend

your money the velocity of money is

closer to 3 to four well AI spending is

well a form of spending so we actually

create a substantially strong

contribution to GDP through uh quite

frankly artificial intelligence spending

and it could be why we've avoided a

recession see again if you take let's

call it 1% contribution towards GDP it

doesn't sound like that much but then

recognize oh my gosh GDP is growing at

about 2 and 1 half% to 3% with AI and

then apply a 3X multiplier to that 1%

that means all of the 3% growth could be

attributed to artificial intelligence

and the additional spending that comes

via the velocity of money this is a

really big problem because it

potentially means our GDP without

artificial intelligence spending if all

of a sudden we pair back the spending if

you know that's a big if right we could

keep spending but if all of a sudden

corporations like Microsoft and meta are

like damn we've been duped well you know

what we've got Big Data Centers let's

try to use the technology deep SE cast

with all the infrastructure we have

let's pause on new infrastructure

spending and let's try to innovate with

what we have which we have plenty and

now all of a sudden you have a license

basically for Amazon meta Microsoft

Google to spend less money on artificial

intelligence and say let's work with

what we have well then all of a sudden

you're in a place where maybe you end up

getting the contribution to to GDP

sitting instead of at 1% and then as a

result the velocity of money at 3% you

actually end up sitting at 0% GDP growth

well what happens when you have 0% GDP

growth and a Federal Reserve that is

freaking

out over a Resurgence in inflation well

what you have is textbook

stagflation and the

Silence from people like Elon Musk

actually speaks volumes to how much of a

risk deep sea could actually be if if

you scroll through Elon musk's latest

tweets there is not a single mention of

deep seek and he tweets a lot why all of

a sudden are we going quiet now maybe

I've missed a reply somewhere but

usually Elon is very very vocal and

there is a potential there is a chance

that maybe elon's looking at this going

oh my gosh this is the valuation of xai

poof that's the extreme I'm not saying

that's exactly what's going to happen

I'm not saying the economy is going to

go into stagflation but we're going to

have a highlighter on a Fed meeting this

week and we're going to be looking for

something very specific we're going to

all be going to meet kevin.com because

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you if you have any questions email us

at staff meetkevin.com otherwise check

it out over at meetkevin.com so what

else do we have to know well we have the

Federal Reserve this week this is very

very important the Federal Reserve this

week is expecting to tell us hey we are

going to pause but markets are actually

going to start pricing in the potential

for more interest rate Cuts if GDP

tumbles now remember I have been one of

the people who's been basically called a

clown because I've argued that at some

point there is going to be an efficiency

movement I have said time and time again

that when you look at a chip like

Blackwell that uses 25% of the energy as

an h100 to perform the same type of

training then you don't need as much

energy and as much electricity or

utility Investments as people think now

what's actually happened is not only are

you getting Chip based efficiency but

now you're getting model or demand side

efficiency which means your demand for

you energy will fall under new

efficiency models but also your demand

falls under more efficient ship models

this makes utilities specifically

exposed to unfortunately the negative

risks of efficiency from better training

compute especially since you're in a

place where you don't actually have that

much profitability coming from

artificial intelligence today A lot of

people are wondering is this

overblown spending now look I'm a big

fan of artificial intelligence and the

things that can come out of artificial

intelligence consider for a moment that

companies like Tesla or I hate to say it

but Tesla's competitors might actually

now be able to engineer full

self-driving versions much more

efficiently than they have previously

the holdup is all going to come down to

data Tesla has the highest access to

data today but what happens when

training gets so inexpensive now you

could actually train using artificial

intelligence simulated models plus

collecting data or even buying data well

at some point that Moe for Tesla's FSD

will begin to shrink and I have concerns

that at some point that moat shrinks

before Tesla actually makes it to the

level of Robo taxis allowing multiple

entrance of Robo taxis at the same time

this is not to be bearish Tesla I

actually think I'm very very overall

bullish long-term Tesla Optimus Robo

taxi very excited the problem that we

all face though right now comes down to

valuation and I hate being that person

that brings up valuation but let's just

consider for a moment what valuations

look like in the market market so when

we jump into US versus global equities

and valuations thereof take a look at

what we have we have the Magnificent s

sitting at the highest level that we've

seen compared to the rest of the world

ever now keep in mind and you know these

These are obviously you know adjusted

over time here uh the problem with this

chart is it doesn't consider the fact

that earnings are disproportionately

showing up in the United States because

of our artificial intelligence so I

actually think you're better off using

an inflation adjusted sort of PE

multiple right a multiple of earnings

how many times earnings on an inflation

adjusted basis are US Stocks trading for

and how does that compare to other

points in history and this is actually

where you come up with the buffet

measure or the cape Schiller uh PE

multiple uh the cape ratio uh for what

do we have valuations in the US Stock

Market and what you'll find is that us

valuations right now sit at the high

that we sat at in December of 2021 which

was also the time the Federal Reserve

became more aggressive again and that's

somewhat what we're going to hear likely

this week an aggressive fed in the face

of inflation fears also while the market

is going to be concerned about growth

fears it's not an ideal Duality that's

going to be very similar to what we saw

in December of 2021 and the fears today

about the Federal Reserve actually began

on December 18th it sounds very similar

to December of 2021 which is when we had

a similar valuation Peak if we go back

to thec recession or bubble we actually

see that valuations were quite a chunk

higher if today we're sitting at uh

3847 then we sat at about

44.5 so if I just divide those into each

other uh we could see that valuations

were about 15% higher in the bubble than

they are now but we're still at the

fourth most expensive time in the

history of the stock market and what I

bring up that the stock market is at its

fourth most expensive time in history I

tend to get comments that make me very

nervous I get comments from people that

say things like but Kevin everybody has

an app on their phone today and

everybody can buy the dip on stocks so

what's going to end up happening

everybody can buy the dip and stocks

will never crash again and it's as soon

as I hear people say things like the

stock market's never going to crash

again or the business cycle is dead that

I start think or quite frankly when

like you know random people at grocery

stores working the checkout lines are

like Hey Kevin which meme coin should I

buy I heard if I invest $1,000 I could

turn it into $100,000 I get a little

concerned that we're close to a cycle

top especially since now you've got oh

okay micro strategy today announced the

launch of STK a new convertible

preferred stock offering ah for

institutional investors right okay so at

least micro strategy is going to buy the

dip by diluting their stock more that'll

be fine I'm sure UBS Cuts hundreds of

Swiss jobs and latest wave of cuts all

right whatever anyway so what do we want

to pay attention to well not just

valuations right because remember

nvidia's valuation actually looks pretty

decent if you assume the growth that

they have been projecting nvidia's

valuation looks like they're Trading for

a 1.7 Peg it's actually pretty decent

but that's based on 30% growth well what

does Nvidia look like if you cut their

growth down to 5% well it looks like a

10.2 Peg which is more expensive than

paler is today just crazy so then you

have to wonder okay well what stocks are

most resilient to any kind of sort of AI

selloff well certainly not advantest

Corp which is an Nvidia supplier which

was down over 8% in Tokyo trading uh is

potentially the uh Chinese stock market

I know some people are investing in the

hangsang tech index which was up over

1.3% a lot of people are frustrated with

SoftBank because they see them as

dumping money into arm and they own a

lot of arm and SoftBank stock was down

over 6% in Japanese trade today and

we'll see how arm performs uh today but

a lot of folks Wonder okay maybe the

place to actually go run and hide uh is

one of two places you look for a pricing

power style stock uh that isn't highly

exposed to artificial intelligence

spending but could be a beneficiary of

more efficient AI models what kind of

company does that sound like well to me

it sounds like apple apple could

potentially be a beneficiary here and I

think that's why they're only down 0.13%

in fact I mentioned this in my video

yesterday that Apple has a big moat just

like Facebook people are still going to

spend with Facebook ads people are still

going to buy iPhones and these products

will be enhanced by the commodity that

is a good chatbot now I got a lot of

complaints yesterday that oh but Kevin

you know this company secretly used a

lot of Nvidia h100s that's fine and in

fact I already addressed that in my

videos that has nothing to do with why

Nvidia should somehow not sell off in

fact it has everything to do with why

Nvidia should sell off even if deep seek

is is using the best Nvidia chips

available today they still only

need 5% of the compute power 5% of the

compute power is 12th so for every one

black CH blackw chips somebody else is

buying uh or I should say for every 20

Blackwell chips another company is

buying they only need one I don't

understand really how some people

believe that that all of a sudden is

going to create more demand for NVIDIA

and I broke down my thesis on that

yesterday so if you haven't seen that

yet make sure you watch the full video

yesterday and you'll understand some of

the context around this now some of the

comments that were coming in were things

like oh but Kevin you know this just

means that people are going to be able

to research more and their demand will

go up this um assumes that artificial

intelligence models are going to be

better than they are today we are not

limited we're not practically limited

with a supply of artificial intelligence

capacity today but it's just sort of at

a 40 level a GPT 40 level and then add

you know the asterisk of reasoning for

for 01 but that's not good enough to

actually get us to AGI we're a long way

away from that we quite frankly have a

commodius dictionary That's What markets

have today everybody now has a chatbot

which is as good as a dictionary that

actually tells you what you want when

you have questions about it and so the

second potential investment that could

be very interesting to pay attention to

in today's market would be bonds bonds

are a bit more of a flight to safety

tool and they're really only something

that you should consider using because

they could lose you a lot of money they

should really only be something that you

consider using if you think that

inflation is going to go away and you

need a downside Market hedge so take it

with a grain of salt but the bond market

is up quite a bit today yields are down

which means bonds are up 8.7 bips on the

10year is great now what you want to do

is you want to look at the difference

between the 10 and the 2-year we're at

uh 4. 53 here we're now at 42 here so

we've got about a difference of about 33

basis points what you want to watch for

is is this going to be the Catalyst that

all of a sudden

pushes that spread between the 10 and

the 2-year up to about 50 to 90 because

if it does that's when you trigger the

recession alarm and you want to be very

very cautious I'm not saying that's

going to happen but I do want you to

take away from this video that there are

going to be great companies Apple

Microsoft meta that yes maybe they

overspend on AI but they're still going

to have a lot of pricing power but your

chip and Chip adjacent companies are

probably going to get hit decently hard

in this sort of environment if the data

ends up being true and again since it's

an open-source model it probably is the

these efficiencies are going to spread

to all of the other AI modeling

companies and the demand for uh quite

frankly new compute chips may fall off a

cliff rapidly and therefore your chip

and Chip adjacent stocks are likely to

get hit the hardest including plans for

Stargate really curious to see what

someone like Elon Musk eventually says

but I do think your highest pricing

power stocks like again even a Tesla

from from this point of view at this

point with the FSD technology they have

they should be more insulated yes they

spent money on chips that maybe they

don't need as many of right now but

that's fine they have the tools they'll

figure out how to use them but they

don't necessarily need to buy more will

this lead to a broad and continuous

market crash I have no idea I hope not

because if it does you have to remember

that as soon as the stock market really

and deeply and meaningfully sells off

we're probably going to end up seeing a

lot of layoffs and I do not want to see

a layoff recession so with that said I

encourage you to head over to

meetkevin.com check out the courses on

building your wealth especially that

trumponomics course you're not going to

regret that purchase promise too you're

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seeing you in the course member live

stream thank you so much for being here

remember trade alert starts soon and

we'll talk soon thanks bye good why not

advertise these things that you told us

here I feel like nobody else knows about

this we'll 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 PA there financial analyst and

YouTuber meet Kevin always great to get

your take