ECC Information Management and Advisory Services

January 28, 2025

1. DeepSeek shows the better side of capitalism system in that it still directs capital, a scarce resource, to the more efficient and effective way to use it, so that the society can benefit from it. What this means for stocks such as NVDA, AVGO, VRT, AMD, etc., is that the froth got squeezed out somewhat, so that when their earnings come out disappointing, their stocks may not drop that much.
2. Before DeepSeek, there was apparently an overinvestment in AI infrastructure. Such an overinvestment cannot be better epitomized by the Stargate project – at least in the short-term.
3. DeepSeek is not a “Sputnik” moment for the U.S. Some people say so because they want to get more money into their own ventures.
4. DeepSeek will bring more better reasoning AI systems that are built on top of open-source infrastructure systems. This means two things, at least: one, we still need giant, extremely powerful infrastructure systems and enormous infrastructure models; two, the application layer will explode with tools and apps that finally help ordinary people (that is, not techie) use AI.
5. The stir caused by DeepSeek in the technology industry and the investment community has a knack in the fact that it was developed by a Chinese hedge-fund. This means a lot to the American entrepreneurs and sensible American people. First of all, we have not heard of a U.S. hedge fund (and there are so many of them, big ones) developed an AI system like DeepSeek. It may be that the Chinese believe, at least at this moment, a top performing AI system is more important than just the money (esp. the money in the pockets of billionaires that will make them trillionaires down the road); secondly, the U.S. – like they realized that their manufacturing base was hollowed out in the past many years – realized now that China’s pool of technological talents is so deep, that the tides are turning or will turn on AI leadership. That, when combined with the current political atmosphere in the U.S. in terms of isolationist and anti-immigration culture, will further strain the talent attraction into the US.
6. Does DeepSeek indicate that China will attract more talents into their technology development areas? Well, China already have, and the question will be: with the U.S. shifting its immigration culture, will more talents shun away from the U.S.? To give just one example, Dr. Geoffrey Hinton is a Canadian computer scientist who won Nobel Prize in AI development; if the U.S. is trying to get Canada to be its 51th state, how many such Canadian talents want to join or work with the U.S.?
7. DeepSeek will bring a lot of innovations on the “applications” of AI, and this will greatly improve productivity. This is a good thing, certainly, for the U.S. economy. However, certain areas will still see inflations, esp. in areas that require human interactions.
8. There is another impact from DeepSeek (and other technology advancements from China such as TikTok, RedNote, etc.) that can be more profound: is the China political model really that bad? Will certain dose of authoritarianism be good, even to the U.S. political system? Well, Trump, Elon Musk and many other company CEOs are thinking the same way. There is a striking similarity between the governing of a large company and the governing of China by the Chinese government, and now the U.S. is being governed by company CEOs, many of whom are from the tech industry in the U.S. Are these CEOs (Trump included) taking hints from the Chinese way?
9. Who will come out as winners and losers of this DeepSeek stir? For winners, I believe anyone who needs AI to do their works will come out as winners, because it is cheaper to do so as compared with before. This means companies like Apple, Meta, Amazon, Walmart, and probably all other industries except technology (however, see point 10 below). For losers, certainly for Nvidia and its related companies (TSMC, AMD, Broadcom, ARM, etc.) – people may not need that many shovels and picks, at least not those too complicated ones.
10. Technology companies are powerful, more so than any time before. This is because of data and the way that these companies amass, exploit, control and profit from such data. The argument that the U.S. is becoming an oligarchy has some merits in it.