Deepseek Throws A Sink Bomb Into The Global Tech Trade!

1/28/2025 12:41:36 AM

(MENAFN- The Arabian Post) Matein Khalid

The ghost of Austrian School economist Joseph Schumpeter must be turning in his grave since his theory of creative destruction in capitalist societies just got vindicated with the vengeance by the meteoric impact of Chinese AI start up DeepSeek, whose competitive threat has triggered a trillion dollar plus bloodbath on nasdaq as futures are down a 1,000 points, the Volatility index is up a ghastly 40% and the world's Big Tech megacaps are slammed in unison, with Microsoft and Nvidia both down 25 points as I write.

DeepSeek has thrown a stink bomb into the stratospheric valuations of AI hyped chip/software stocks in Silicon Valley, Europe and Asia. DeepSeek is definitely DeepMerde for the Valley's Mag-7 hyperscalers who planned to spend $270 billion on AI Capex in 2025 but I just do not think that this Chinese product remotely meets the security/provenance protocols that will make it a significant rival to Nvidia and Broadcom as a supplier of Gen-AI training/inference GPU chips. The AI supply chain is not going the way of brontosaurus and the fax machine – for now.

Of course, markets will go berserk tonight as 30X the normal volume of Nas-100 futures have traded in the pre-market 3-hours before the New York open. DeepSeek is admittedly no schlock product as it rises to the top of the Apple's App Store and is given a thumbs up by MAGA venture capitalist Marc Andreessen. Its cost advantage over existing AI models will puncture a hole in the nosebleed valuations of the Valley's best and brightest Godzillas, as we are witnessing in real time.

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DeepSeek is an argument to buy Chinese AI stocks, a few of whom traded limit-up in Shanghai due to their close links with this PRC homeboy parvenu. In any case, Happy Chinese Lunar New Year and let us hope that the year of the snake is hunky-dory for investors though I seriously doubt it. I am stunned to see Siemens Energy drop 22% in a single session.

At 27X earnings, the Nasdaq 100 is at least 4 points above its 5-year average and its valuation premium driver was the spectacular AI hype triggered by the launch of OpenAI and Nvidia's 10X earnings rise 2-years ago. This is a Sputnik moment for the Trump White House and the ultra MAGA economic nationalists Cold War 2.0 acolytes from the Valley who are now all King Donny T's faithful loyalists.

DeepSeek proves that China is not exactly in the AI Stone Age, despite Biden's draconian export controls on advanced chip sales to the PRC. DeepSeek also proves that access to open-source technologies only accelerates the competitive threat to US dominance in the AI arms race.

DeepSeek's cost also slams the assumption that the development of AI models will require even greater amounts of wildly expensive computing power and energy. A 40% rise in VIX is an ideal moment to accumulate my fav real estate stocks on the NYSE, led by Prologis, up a stunning 7.6% last week.

Also published on Medium .

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