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there's a new AI model on the scene that's smart cheap and made in China it's called Deep seek and it's causing a
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panic in Silicon Valley which is paying a lot of attention and also on Wall Street deep seek has reportedly
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outperformed models from open AI meta and anthropic in some tests and it operates at a fraction of the cost of
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those models using fewer high-end chips this is the ones that are made by Nvidia
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and are hard to get and the incumbents have been pricing them up heavily by grabbing all of them the markets are not
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reacting well to deep seek as of this recording Nvidia is down 16% Oracle is down 10% Microsoft is down nearly 4%
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obviously meta is going to be affected all the others so there's a lot to talk about and I've seen different analysis
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of exactly what deep seek does Yan laon from meta was making an argument that it
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isn't as what they're re they're doing sort of a cheap and dirty version then it's not nearly as the stuff they're
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doing is much more advanced by the US companies uh it's currently number one on Apple's uh free top apps chart uh
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again China invading it in this country in a very different way so thoughts on this situation because you and I have
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talked about this quite a bit is this money ill spent by us uh companies and is it being relegated to the rich
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incumbents well first you just have to temper the or put some context to the I mean Nvidia is down 15 or 16% it's shed
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something like a half a trillion dollars which basically if you take out Tesla it's shed today the value of the entire
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Global automobile industry sounds Tesla so this is pretty dramatic but at the same time that just takes it back to its
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valuation in October and when you look at market dynamics when these companies have experienced
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these type of run-ups it is like a balloon inflating Beyond its natural capacity and the slightest the slightest
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touch can pop it and so in some ways the market was probably looking for an excuse to take these stocks down a bit
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and it got it because what's interesting is NVIDIA will have a pretty interesting
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argument on on Capitol Hill saying when you refuse to let us sell into these countries they come up with workarounds
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and in this case work around might tank the US economy and everyone's excited by
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the fact that these models open AI supposedly the models their llms cost 100 million to train and they're
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claiming this thing costs and they've been public it's open source cost a little over 5 million to train so
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whereas the majority of lm's and U AI companies have been taking sort of this Brute Force strategy where it's buy as
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many chips as possible this is saying maybe you don't need as many chips the thing find it equally interesting is the
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second order effects here and that is Constellation Energy and some of these nuclear stocks have skyrocketed because
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the choke point was supposedly going to be energy but now with this this model which appears to have chips speaking to
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each other in a more efficient less Energy consumptive Way nuclear stocks are crashing electric Constellation
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Energy all these things that have had incredible run-ups are saying wait the entire supply chain or the assumptions
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we made about the supply chain in terms of the the kind of the Brute Force of chips that we're going to need the
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amount of energy it's all now coming into a little bit of question but to be clear the correction here is like it's
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taking them back three months and all of the stocks that have crashed quote unquote crashed are are only up you know
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70% for the year now not 98 and a lot of analysts the smart analysts I've read have said like every Community or any
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sector it's going to bifurcate into the cheap layer and then the high-end layer which will still go hard at massive
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Computing and massive energy and do more sophisticated things and this will be sort of you know everything eventually
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goes Walmart Tiffany right and they're saying this might be the Walmart and it's the Chinese and they'll come up
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with cheaper models but I it's fascinating to see that basically this notion this this kind of conventional
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wisdom that you would need massive gpus and massive Energy may not be um kind of
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the written in law that we thought it was going to be let me read Yan Lon who's the head of meta I just read
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recently interviewed him and you can go listen to that long interview about this
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but he's writing to the people who see the performance of deep seeds and think China is surpassing the US and AI you're
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reading this wrong the correct reading is open- Source models are surpassing proprietary ones deep seek has profited
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from open research in open source for example pie torch and llama from meta they came up with new ideas and built on
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top of other people's work because their work is published and open source everyone can profit from it this is the
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power of open research and open source obviously this is the way he's talking his own book that's correct I was just
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going to make SCE yes that's correct that's what I was going to say but it's interesting he's having really
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interesting arguments and he said he's having a bunch of them which is just interesting and one of them that he just
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did because Gary Marcus this guy who's somewhat of a a crank a little bit um was saying that Congress needs to bring
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in Zuckerberg and Lon to discuss how their unilateral open sourcing decision rapidly undermined the US advantage in
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general of AI he goes an absolutely hilarious take revealing the complete misunderstanding of the fact that open
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research open source accelerates progress for everyone from some repet claimed that deep learning was hitting a
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wall but one of the things he just wrote again cuz he's he's he's getting in there very deeply major misunderstanding
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about AI infrastructure Investments much of those billions are going into infrastructure for inference not
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training running AI assistant services for billions of people requires a lot of compute once you put video understanding
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reasoning large scale memory and other capabilities into AI systems inference costs are going to increase the only
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real question is whether users will be willing to pay enough directly or not to justify capex and Opex I think that's
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that's probably he thinks these reactions are woefully unjustified and at the same times he's sort of arguing
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that they aren't right which is interesting interesting interesting it's just so typical to Chinese to come up
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the entire Chinese economy was sort of built on more us yeah and my guess is they had a mandate or they've said all
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right we're not going to have access to the same level of high-end ships we need
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workarounds and it's it it appears to spond really interesting Innovation and using open source yeah using open source
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the I mean the scary thing I I mean in typical meta fashion their llm you can download a version of llama with
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absolutely no guard rails and you can you can request information on anything you know the most politically correct I
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find of them is is anthropic if I start asking questions about insider trading from speaker to
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Emer Pelosi it immediately gives me all these things back we cannot endorse nor promote strategies around inside of
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trading chpt kind of goes straight into it and I think I think llama will say well here's what you do you call your
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cousin I find it fascinating it be interesting to see what happens to the stock I mean these companies have
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already let some air out it's already gone to the energy guys it'll be interesting to see how the market reacts
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is this I mean the question is and I don't know the answer is this the beginning of a massive correction that
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will infect the entire NASDAQ the entire S&P and quite frankly now these companies I don't say become too big to
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fail but they fail you know if they sneeze the US economy is going to catch a cold right now because the stock
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market's going to crash so is this the beginning of the correction we've been waiting for for 15 years I mean a real
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correction we had a mild one in 21 or is this feel a little nervous I think people feel I think people feel a little
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nervous about or or and it's also kind of a in a weird way an argument for free trade and that is if we had let them
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just buy Nvidia gpus would they have figured out this workaround would they have felt as motivated to figure out a
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workaround or quite frankly is today one of those days we're going to look back when we're going to think that was a
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buying opportunity because they're going to resume their hyperscaling so I think
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it's fascinating