Deep Seek or Deep Fake?

I have heard compelling arguments on both sides of this issue.

Since I am not anywhere near an expert in the tech area, I have to rely on those that are deemed to be. I have done a lot of research on this in the last few days because the answer to the question of “Is deepseek a real game changer or is it just a made-up excuse for a “market” pullback or psyop of some kind?” This could make a world of difference particularly in the high-flying tech stocks.

From most tech experts that I have heard from the belief is that this is a paradigm shift. Billions have been poured into many AI companies with the idea that it would be a closed system, and it would be a subscription type of service. This has led many companies to invest billions in computer chips, energy and technology. As of last week, it appeared that the opportunities were historic.

This led to massive investments in energy- like Microsoft restarting Three Mile Island to have enough energy to power their new venture. It led to massive orders for companies like NVIDIA and other chip makers. Even utilities and energy companies benefitted. This led to FAR higher share prices for those companies.

Enter Deepseek. It is said that their AI system is similar to the AI systems in the USA with a few MAJOR differences. #1- Supposedly this AI system was developed (or at least funded) by a Chinese hedge fund and the approximate cost was $560 MILLION. That is a far cry from the tens of billions spent by US companies. #2- And possibly the biggest game-changer- Deepseek’s AI is an OPEN platform. This means that anyone can access and use it for FREE. Currently it is the #1 app on the Apple Store. To me, this is the dagger for those companies that have heavily invested in the subscription closed model.

Keep in mind that this is a Chinese company. I have read that in their privacy policy your information can be sent back to Deepseek. Keep in mind when things are “FREE” you are likely the product.

In another interview a tech expert said that any differences in the actual functioning of the platforms would be inconsequential to 95% of the people using it so a FREE model would be fine.

This OPEN system relies more on software than hardware and uses FAR less energy and needs far fewer chips to get the job done. This is the reason the financial game shows are giving for the major pullback on Monday.

On the other side we have people like Greg Mannarino who believes that the timing of this was interesting. Just when President Trump starts talking about Stargate and 500 Billion for AI research this comes out days later. He believes that this will be used to incite even more spending. Could be.

Glenn Beck, on his podcast, actually demonstrated how Deepseek may be programmed to toe the communist party line. In a question about who caused the most deaths ever Genghis Khan and Mao were the first two answers, and, in a few moments, the “service” denied having said it. Possible cause for concern.

Still others- mainly traders have made comments about a pullback being necessary to get the algorithms to buy and that an excuse was needed for an overdue pullback. I wouldn’t discount this either.

In any case, I believe this shows the fragility of our system when 36% of the VALUE of our S&P 500 is in 7 stocks. Historically, this has been a red flag as the market breadth is extremely narrow.

NVIDIA saw a loss of $600 BILLION in market cap on Monday.

The whole idea of investing is “BUY LOW-SELL HIGH”. About the only assets that I see that could really be considered to be buying LOW would be commodities overall (Leigh Goehring- Commodities have never been cheaper in relation to financial assets in history as they are now) and gold and silver in particular.

What have we seen recently? Gold has gone from $250.00 an ounce in 2000 to $2752.00 as I am writing this. Many have asked “Did I miss it?” While you may have missed some solid returns, I believe that since the Fed and major banks have been suppressing the price the future gains could dwarf what we have already seen. Based upon the money conjured up in the last 17 years or so the price should be exponentially higher right now in my opinion. Part of the reason it is not is the manipulation to make the dollar APPEAR strong as we see its purchasing power collapse.

While many see this as a negative, I see it as a gift to anyone who wants to buy something at a discount. The central banks are taking full advantage of this scheme to buy gold in record amounts. For all of the traders out there who have been right for years as the paper (fake) “markets” dominated price action the paradigm has changed and central banks buying the dips and taking physical delivery has fundamentally changed the game. It is likely we haven’t seen anything yet. When physical supplies are exhausted the rise in price will likely stun most “investors”.

The bottom line is that “assets” that are not really assets at all are being coveted by those who are chasing price while getting little VALUE for their purchase. In my opinion an actual ASSET has to not be a unit of debt and must have some utility. A mathematical equation will do me no good- particularly if the utilities are down. Personally, I will take hard assets-particularly when an expert like Leigh Goehring lets us know that they have not been cheaper vs. financial assets in history.

Many great investors have said buy when others are fearful and sell when others are overly bullish.

Some of the bullishness has been smacked out of the “market” right now but valuations are still at historically high levels. I believe that there are so many reasons for caution here that being a bit more defensive makes a lot of sense.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

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