Will DeepSeek be the black swan that finally pops the AI bubble, and takes down the stock market?
It sure looks like this will be the case.
Is DeepSeek a Sputnik Moment?
I'm not sure that "software will eat the world," but it could consume the stock market bubble in a single gulp.
Is DeepSeek a Sputnik Moment? Let's break it down. The Soviet Union's October 1957 launch of the world's first artificial satellite, Sputnik 1, stunned the U.S., which reckoned it had a commanding lead in "the Space Race." (It turns out the U.S. had the capability of launching a satellite before Sputnik, but held off for various reasons.) That a geopolitical rival had reverse-engineered advances and leapfrogged the U.S. shocked America into a multi-decade response that culminated, at least in the public perception, in America winning "the race to the Moon" by landing the first humans on the Moon in July, 1969 in the Apollo 11 mission. The shockwaves generated by a Chinese company's release of a suite of AI tools called DeepSeek last week may well rival the Sputnik shock, as the DeepSeek AI tools appear to meet the same benchmarks as AI tools such as those issued by OpenAI and other companies, but requiring far less computing resources. DeepSeek achieves its capabilities not from expensive hardware (processors) but from advances in software that can be used on smartphones. DeepSeek software evaporates 1) the need for super-energy-hungry, super-expensive processors, 2) vast quantities of electricity and 3) the market for paid subscription AI tools, as DeepSeek's software runs on standard processors and it's been released as open-source software which can be downloaded and run offline on local resources such as PCs or smartphones. In effect, the AI hardware monopoly and quasi-monopoly of AI software has been broken, and like Humpty-Dumpty, it can never be put back together again.
At a high level, NVIDIA faces an unprecedented convergence of competitive threats that make its premium valuation increasingly difficult to justify at 20x forward sales and 75% gross margins. The company's supposed moats in hardware, software, and efficiency are all showing concerning cracks. The whole world— thousands of the smartest people on the planet, backed by untold billions of dollars of capital resources— are trying to assail them from every angle. Perhaps most devastating is DeepSeek's recent efficiency breakthrough, achieving comparable model performance at approximately 1/45th the compute cost. This suggests the entire industry has been massively over-provisioning compute resources. Combined with the emergence of more efficient inference architectures through chain-of-thought models, the aggregate demand for compute could be significantly lower than current projections assume. The economics here are compelling: when DeepSeek can match GPT-4 level performance while charging 95% less for API calls, it suggests either NVIDIA's customers are burning cash unnecessarily or margins must come down dramatically.
Communist China has only succeeded economically because of US investments and sharing of technology. Otherwise it would have remained a 3rd rate totalitarian government. Now its a 1st rate, anti-human totalitarian government. In the US our free market capitalism has been taken over by a corrupt corporate oligarchy that has a revolving door with the regulatory agencies. However, its not all about money. "We hold these truths to be self evident, that all men are created equal, endowed by our Creator with certain inalienable rights, the right to life, liberty and the pursuit of happiness." These values unleashed upon the world an incredible amount of creativity and human freedom, that is now being crushed by a corrupt corporate oligarchy and sustained by their propaganda mainstream press and purchased politicians.
I agree with most of what you say, though China itself has a very ancient and capable civilization that is having a Confucianist renaissance. But as far as the US is concerned, yes, our fundamental values have been corrupted by the corporate oligarchy that in fact was imposed on us by the globalist bankers and domestic Money Trust. These took over with the Federal Reserve "Insurrection of 1913" and has gone from bad to worse ever since. That' what I have been writing about since I retired from the U.S. Treasury Department in 2007. I would strongly urge you to read my book "Our Country Then and Now" and tell me what you think.
Capitalism progresses by normalising industrial genocide; the semi-automated elimination of people and cultures to make way for new developments. Pharmaceutical and weapons companies manage world events to produce profit extraction opportunities. The façade of democratic politics is a finger puppet show played out in the shadows cast by the flames of an immense and ongoing algorithmic conflagration of values. The meaning of events we experience is a simulacrum but real people die and there is real suffering. Child suicide, as a result of the colonisation of mental experience by social networking businesses, fuels the profit engine of an algorithmically determined capitalist system that is sliding ever further into madness. Oligarchs are not really in charge. World events are governed by algorithmic decision-making from an unknowably complex technical system through the dark arts of data science. An inhuman universe, we have inadvertently created, designed by soulless technocratic automatons. We have become slaves to an insane God whose mandatory doctrines cannot be questioned.
Will DeepSeek be the black swan that finally pops the AI bubble, and takes down the stock market?
It sure looks like this will be the case.
Is DeepSeek a Sputnik Moment?
I'm not sure that "software will eat the world," but it could consume the stock market bubble in a single gulp.
Is DeepSeek a Sputnik Moment? Let's break it down. The Soviet Union's October 1957 launch of the world's first artificial satellite, Sputnik 1, stunned the U.S., which reckoned it had a commanding lead in "the Space Race." (It turns out the U.S. had the capability of launching a satellite before Sputnik, but held off for various reasons.) That a geopolitical rival had reverse-engineered advances and leapfrogged the U.S. shocked America into a multi-decade response that culminated, at least in the public perception, in America winning "the race to the Moon" by landing the first humans on the Moon in July, 1969 in the Apollo 11 mission. The shockwaves generated by a Chinese company's release of a suite of AI tools called DeepSeek last week may well rival the Sputnik shock, as the DeepSeek AI tools appear to meet the same benchmarks as AI tools such as those issued by OpenAI and other companies, but requiring far less computing resources. DeepSeek achieves its capabilities not from expensive hardware (processors) but from advances in software that can be used on smartphones. DeepSeek software evaporates 1) the need for super-energy-hungry, super-expensive processors, 2) vast quantities of electricity and 3) the market for paid subscription AI tools, as DeepSeek's software runs on standard processors and it's been released as open-source software which can be downloaded and run offline on local resources such as PCs or smartphones. In effect, the AI hardware monopoly and quasi-monopoly of AI software has been broken, and like Humpty-Dumpty, it can never be put back together again.
by Charles Hugh Smith
https://charleshughsmith.substack.com/p/is-deepseek-a-sputnik-moment
The Short Case For Nvidia Stock
At a high level, NVIDIA faces an unprecedented convergence of competitive threats that make its premium valuation increasingly difficult to justify at 20x forward sales and 75% gross margins. The company's supposed moats in hardware, software, and efficiency are all showing concerning cracks. The whole world— thousands of the smartest people on the planet, backed by untold billions of dollars of capital resources— are trying to assail them from every angle. Perhaps most devastating is DeepSeek's recent efficiency breakthrough, achieving comparable model performance at approximately 1/45th the compute cost. This suggests the entire industry has been massively over-provisioning compute resources. Combined with the emergence of more efficient inference architectures through chain-of-thought models, the aggregate demand for compute could be significantly lower than current projections assume. The economics here are compelling: when DeepSeek can match GPT-4 level performance while charging 95% less for API calls, it suggests either NVIDIA's customers are burning cash unnecessarily or margins must come down dramatically.
by Jeffrey Emanuel
https://youtubetranscriptoptimizer.com/blog/05_the_short_case_for_nvda
Excellent observations. Thank you.
Communist China has only succeeded economically because of US investments and sharing of technology. Otherwise it would have remained a 3rd rate totalitarian government. Now its a 1st rate, anti-human totalitarian government. In the US our free market capitalism has been taken over by a corrupt corporate oligarchy that has a revolving door with the regulatory agencies. However, its not all about money. "We hold these truths to be self evident, that all men are created equal, endowed by our Creator with certain inalienable rights, the right to life, liberty and the pursuit of happiness." These values unleashed upon the world an incredible amount of creativity and human freedom, that is now being crushed by a corrupt corporate oligarchy and sustained by their propaganda mainstream press and purchased politicians.
I agree with most of what you say, though China itself has a very ancient and capable civilization that is having a Confucianist renaissance. But as far as the US is concerned, yes, our fundamental values have been corrupted by the corporate oligarchy that in fact was imposed on us by the globalist bankers and domestic Money Trust. These took over with the Federal Reserve "Insurrection of 1913" and has gone from bad to worse ever since. That' what I have been writing about since I retired from the U.S. Treasury Department in 2007. I would strongly urge you to read my book "Our Country Then and Now" and tell me what you think.
https://www.amazon.com/Our-Country-Then-Richard-Cook/dp/1949762858
Thank you for introducing us to Indi. I subscribed to his blog after his last article that you cited & have been reading through it ever since.
He is outstanding on other topics, from home life to religion & philosophy, as well as geopolitics.
I feel very at home with him.
Yes, he's more than just a brilliant commentator; he's a real humanitarian. Thanks for reading.
China outcompetes America. Has nothing to do with Adam smith or Karl Marx.
Capitalism progresses by normalising industrial genocide; the semi-automated elimination of people and cultures to make way for new developments. Pharmaceutical and weapons companies manage world events to produce profit extraction opportunities. The façade of democratic politics is a finger puppet show played out in the shadows cast by the flames of an immense and ongoing algorithmic conflagration of values. The meaning of events we experience is a simulacrum but real people die and there is real suffering. Child suicide, as a result of the colonisation of mental experience by social networking businesses, fuels the profit engine of an algorithmically determined capitalist system that is sliding ever further into madness. Oligarchs are not really in charge. World events are governed by algorithmic decision-making from an unknowably complex technical system through the dark arts of data science. An inhuman universe, we have inadvertently created, designed by soulless technocratic automatons. We have become slaves to an insane God whose mandatory doctrines cannot be questioned.
The "God" you speak of, of course, is human created. There is also an objectively real Divine Spirit. Please read further on this Substack.
I am lucky enough to be Christian. But well said brother Richard and thank you for your excellent articles.