China’s DeepSeek AI platform challenges the US’s brute force hardware approach by using clever open-source software to achieve similar or better results at a fraction of the cost, running on cheap hardware and enabling widespread innovation.
DeepSeek’s 85% precision approach, guided by a reward system, uses 30-40% less processing power than OpenAI’s brute-force method, compressing answers post-process like reducing photo file size.
DeepSeek’s smartphone-compatible, offline-capable AI models could disrupt the current AI landscape, enabling a new wave of software-based products and competition that benefits the economy by fostering innovation and widespread use.
The Magnificent 7 AI stocks, heavily invested in by the biggest companies, may see their market valuations challenged as DeepSeek’s open-source approach undermines their perceived monopolistic advantages and long-term growth potential.
DeepSeek’s low development cost of $5-500M, compared to tens of billions spent on Nvidia GPUs, could disrupt AI economics, changing expectations of technology and economics in the AI space.
DeepSeek’s efficiency and low cost could unleash economic growth over the next 5-10 years, but AI job displacement is a concern, as not all human labor can be automated.
Concentration of global capital in US equity markets, with the Magnificent Seven stocks representing a significant portion, makes the market vulnerable to disruption from DeepSeek’s approach.
The dot-com era taught that while internet grew, profitability shifted; AI expansion may not generate gigantic margins as before, with profit margins competed away over time.
AI job displacement differs from past transitions, potentially leading to a massive unemployment crisis with unemployable workers; aspiring entrepreneurs can leverage technology to create companies that replace thousands of jobs without real people.
Societal decisions on prioritizing paid work and state-provided employment platforms, like Great Depression public works programs, will have economic impacts, as government reflects social awareness, values, and changes.
The Sputnik moment analogy highlights the geopolitical significance of DeepSeek’s technological leap, challenging the notion of guaranteed US dominance in AI and underscoring the potential for asymmetric advances to undermine brute force advantages.
Since December 2023, 25% of silver has flowed from London to New York in anticipation of potential Trump tariffs, with only 30% of London silver now available for delivery.
The 1970s saw 3 inflation waves, each higher than the last, with silver up 28x in 10 years vs 14x for gold, as the S&P lost 70% in real terms.
Gold and silver are nearing all-time highs, with gold currently at $2,774, just $25 away from its intraday all-time high of $2,800.
The bond market disagrees with the Fed’s rate cuts, as the 10-year yield rose 100bps despite the Fed cutting rates by 100bps since September 2023.
The U.S. debt burden is at record levels, with interest payments becoming the biggest cost for the Treasury, necessitating money printing.
China has been paying 10% premiums over US silver prices, with solar panel manufacturing consuming 20% of global silver supply.
Military applications are a strategic silver demand source, with 500 grams of silver used per Tomahawk missile.
Charts show that when the Fed cuts rates, silver gains an average of 32% in the first 24 months, with potential 300-332% returns from bottom to peak over 2-4 years.
Quality silver stocks, a small market, can deliver exponential returns (e.g., largest silver companies saw 16-17x returns in the last cycle).
Silver is irreplaceable in critical applications like batteries, communications equipment, and missiles, with one-time industrial consumption often ending in landfills.
Silver’s position as both a monetary and industrial metal (approximately 50% each) drives higher prices, historically outpacing gold in bull markets.
Higher commodity prices, especially oil, have preceded every recession in the last 10 years (except the double-dip), often causing inflation before economic downturns.
A steepening yield curve after inversion, moving above zero, combined with rising commodity prices, is a powerful bearish factor for the economy, potentially leading to recession if commodity prices rise significantly to 350 in the next 3-4 months.
The 70s oil shocks, Iraq war in 1990, and dot-com boom and bust in 1999 caused significant moves in commodity prices and subsequent recessions.
The GCC ETF, being more equally weighted than the CRB, is considered a better indicator of potential recession as it moves up alongside other commodity prices.
In 2022, despite two quarters of negative GDP growth, the NBER did not declare a recession due to key economic indicators like consumption, income, and production not declining as they typically do during recessions.
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