Over the weekend, DeepSeek, a Chinese AI company, grabbed headlines with its new AI models.
Bold claims emerged, suggesting the company had replicated OpenAI-level technology for just $5 million … which works out to be more than 20X cheaper than the current costs.
This sparked a frenzy on social media and sent shockwaves through the market, causing a sharp selloff in AI-related stocks.
By Monday’s close, the market had suffered a dramatic plunge, erasing nearly $1 trillion in value as investors reacted to the news.
Today, Mr. Market did a complete 180. And cooler heads prevailed.
AI stocks rebounded, proving yesterday’s panic was an overreaction — something I pointed out to my subscribers.
Here’s what happened…
Don’t Fall for the Hype: DeepSeek Didn’t Rebuild OpenAI for $5 Million
DeepSeek created two kinds of models: the V3 Model and the R1 Model.
The V3 Model uses a technique called “Mixture-of-Experts” (MoE), which combines smaller models for powerful performance while using fewer resources.
It’s efficient, smart, and saves energy — but it’s not groundbreaking.
The R1 Model takes things further, improving reasoning skills to compete with OpenAI’s top AI.
What about the $5 million cost being thrown around? Well… That’s not the full story.
It only accounts for the cost of renting GPUs (the computers needed to train the models).
It doesn’t include all the time, research, and resources DeepSeek poured into development. So, no, they didn’t “rebuild OpenAI” on a shoestring budget.
That said, DeepSeek’s models are no slouches.
They excel in tasks like language, coding, and math while using far less computing power than similar AI systems.
Their technology highlights include handling 671 billion parameters efficiently (only 37 billion are active at a time) and using clever techniques to save memory and reduce costs.
But is this revolutionary?
Not quite.
Many big AI companies already use similar strategies. DeepSeek’s lower pricing makes its models accessible, but it doesn’t flip the AI world on its head.
My takeaway?
This is Just the Beginning
DeepSeek’s work is impressive, but instead of hurting AI demand, it will create even more need for AI chips and technology.
This is a major turning point in the growth of AI, making it more accessible for businesses worldwide.
The best days of AI are still ahead.
Volatility is your friend. Because it gives us the opportunity to buy outstanding companies at great prices.
For example, one AI chipmaker from the American Prosperity portfolio is trading below our buy-up-to-price: Micron Technology (MU).
When prices are lower — I look to be a buyer, not a seller.
And the reason is so simple: It’s also why I enjoy shopping at Costco … I love bargains!
How you react to volatility will make all the difference in your net worth over the next five to ten years.
If you’re new to investing in AI or underinvested, you can buy shares of Micron today knowing you’re getting a quality business at a great price.
To unlock more AI recommendations, click here to become an American Prosperity member.
If you own the best AI stocks, stay the course — the opportunity is just getting started.
Regards,
Charles Mizrahi
Founder, Alpha Investor
