History has shown that the scale of any discovery is directly proportional to it’s cost effectiveness. And Deepseek is exactly what it takes to bring AI into all spheres of life. The evolution of Deepseek is also a testimony to the fact that the Western civilization has massively under appreciated what China has achieved in the post Covid years. During the last 5 years, Chinese leadership has simply followed the Deng Xiaoping’s advice: “secure our position; cope with affairs calmly; hide our capacities and bide our time; keep a low profile and never claim leadership.” Since Covid, most of the western firm CEOs have had little contact with China either in terms of physical visits or on ground reports. Even the Western media is more focussed on China's low growth nos, weak consumption profile, shadow financing woes etc. But we forget that China produces more STEM graduates than the rest of the world combined. Deepseep is not just a cost effective evolution of AI. It is the democratisation of AI which will bypass US sphere of influence just like BYD did in EVs to Tesla. With Deepseek, the cost disinflation stage of the AI investment cycle is arriving much faster than previously envisaged. If Deepseek builds on it’s recent performance and is adopted by more & more users (especially non US), it implies a strategic threat to the AI technology supremacy by current US large tech leadership especially Nvidia. We believe the rate of adoption will shoot up as well as the cost of developing AI hence forth will shoot down significantly post Deepseek emerging on the AI landscape. This implies the valuations of US large tech names such as Nvidia in particular are over bloated and should correct by roughly 30-40% in next 1 year from current levels of 120-130. NASDAQ itself should correct by 20% as democratisation of AI happens on a large scale bypassing US interests.
