DeepSeek stole my market cap

Hey Superheroes,

It looks like domestic inflation is finally stabilising. Trimmed mean inflation – aka the RBA’s preferred inflation measure – is finally back within the RBA’s target range for the first time in three years. Yup, that means analysts now expect our first rate cut in years on 18 February.

On the contrary, the U.S. Fed kept rates on hold this week – its first meeting without a rate cut since July 2024. Looks like Powell is in wait-and-see mode given President Trump just got inaugurated and has already enacted some new measures that may impact the economy.

Lots of massive news this week. Let’s get on to it. 

Is DeepSeek really worth a deep thought?

Imagine you created something revolutionary for $1,300 and someone comes along claiming to have created that same thing for less than $100.

Yup, that’s DeepSeek – although the numbers are much larger in scale.

DeepSeek’s R1 AI model has been found to be pretty much as accurate as ChatGPT’s/OpenAI’s latest o1 model for over 13 times cheaper to run.

The news sent both ASX and Wall Street tech and AI-related stocks into the red. Nvidia shares tanked 17% – losing US$600 billion in market value, the largest one-day loss for a company in U.S. stock market history.

🤔 What is DeepSeek?

A Chinese start-up founded in 2023, DeepSeek gained global attention earlier this month after it boasted that its new AI model, R1, performed on par with ChatGPT while using significantly less computing power and running on Nvidia’s older chips.

While that’s impressive, it was a research paper published last week that pushed the startup to stardom, stating R1 was also a lot cheaper to run than OpenAI’s o1.

DeepSeek claims its latest model cost just US$5.6 million to train, a stark contrast to the usual US$100M to US$1B that U.S. companies record.

🫨 So why did Nvidia shares fall?

AI models require high-level graphics processing units (GPUs) to run, as they’re designed to handle large amounts of data simultaneously to execute complex calculations. One could say that Nvidia became one of the world’s largest companies thanks to its GPUs.

With DeepSeek allegedly requiring less power to do similar AI work, concerns mounted for future demand for Nvidia’s AI chips.

DeepSeek reportedly has only 50,000 Nvidia GPUs – less than 10 times as many as U.S. AI companies do.

Learn more about Nvidia’s business model →

🌎 Permeated global sharemarkets

Apart from Nvidia, semiconductor stocks Broadcom and AMD also fell 17% and 6% respectively on fears of lower demand for semiconductor chips. Data centre companies including Dell, Oracle and Super Micro Computer also slumped. 

Even the more detached energy sector was affected. GE Vernova and Vistra both tanked over 20% on fears that the new tech would require less energy to run.

Locally, ASX-listed Brainchip and Appen also saw red.

🧠 Does DeepSeek really matter? 

Some (including Elon Musk) have disputed DeepSeek’s claims, while Microsoft and OpenAI have begun investigating whether OpenAI’s data and technology were used to train DeepSeek’s model.

Either way, if DeepSeek’s AI model is truly as efficient as shown, AI could progress much faster and at less cost. We’ll just have to wait and see.

🔦  Some other things we’re shining the Spotlight on:

MICRO-TOK OR TIK-SOFT?: Microsoft is apparently in talks to acquire TikTok, according to President Donald Trump. Tiktok was briefly banned from the U.S. earlier this month amidst security concerns, with the U.S. Government now requiring its Chinese owner ByteDance to either sell it or face a more permanent ban by April. 

HIGHER BUT LOWER: Zip reported 50% higher cash EBTDA, 25% higher total transaction volume and 20% higher revenue in Q2 FY2025 than in Q4 FY24, but its lower revenue margin of 7.9% (vs. 8.2%) sent Zip’s share price diving 25% yesterday.

IT’S BEEN SIG-NED: Sigma Healthcare (ASX:SIG) and Chemist Warehouse’s merger deal has officially been approved. The merged entity, set to have nearly 1,000 stores and annual earnings of A$1 billion, is expected to list on the ASX in February with a market cap of about A$30 billion.

Keep up to date on the markets by following us on Instagram @superheroau!