everybody was talking about deep seek it wiped tens of billions from the stock market and asserted China's growing dominance in AI completely disrupting the tech world but the more you look into this whole deep seek situation the more you realize there's some very serious questions that need answering why was deeps reveal just after the recently revealed $500 billion Stargate project how is it actually possible that out of nowhere this unknown AI could Ed far less resources and undercut all of American Ai and who was actually behind this and what is their real goal with this
stuff well after you've watched this video you'll start to see that maybe deep seek is about a lot more than just a simple AI chat bot on the surface deep seek was established by the Chinese hedge fund high flyer like any other Silicon Valley type story it was a company from supposedly humble beginnings as highfly made its name through high frequency trading essentially only making money from exploiting price and efficiencies across Global markets and soon they started working on prediction models they could find short-term price movements faster than competitors after a few years of successful
trading they decided to move into the world of AI as this was the hot new topic as every new iPhone laptop and even washing machine had some sort of AI involved so in 2023 they established an artificial general intelligence lab dedicated to research developing AI tools and later that year the lab became its own company that we now know as deeps over the next year or so deep seek developed a few AI programs and started causing problems for American Tech Giants it's first model deep seek version 2 forces this competition to lower their prices to
stay in the game the prices got so that while deep sea was still making a profit other companies were suffering heavy losses and yet the company was more interested in research than commercializing his products so the question in everyone's mind was how is this possible there were then a few other programs but none of them made too big of a splash in mainstream media people realized China was coming for the AI industry but L did they realize how advanced China's AI systems really were until the beginning of 2025 near the beginning of January deep SE
g 1 debuted on Apple's App Store it was an AI system designed to to function similarly to open ai's chat gbt and in the next two weeks afterwards it received so many downloads that it successfully booted chat gbt from its spot as the most downloaded AI assistant as unlike chat gbt deep SE g 1 uses Chain of Thought reasoning it doesn't just spit out an answer you but shows its process breaking it down section by section so that you can understand how it's getting to its answer these models can handle complex multi-step problems better than
traditional language learning models which was even more of a shock considering that back in 200 23 America had taken steps to prevent China from getting its hands on AI chips specifically nvidia's h800 and a800 chips it restricted the exportation of these products and encouraged his allies in Europe and Asia to do the same doing everything they could to completely squash China's ability to have a booming AI industry which completely frustrated the already strain Chinese government to no end especially when their own AI programs were so disappointingly lackluster supposedly deep SE didn't let the limitations of
a smaller GPU capacity stop it which led the stock market to wonder what deep seek would be capable of if given access to more resources the possibility that AI might be able to operate with less power hungry processes caused Tech Giants to panic even though people like kilo must announced this saying they must have the chips and are probably just hiding it due to the trade embargos Panic would only worsen when it came out that deep sea car had been developed in only two months with a budget of 5.5 million and if investors saw that
AI could be developed faster for much less in China then they would need to park their money elsewhere and that's exactly what they did on the 27th of January as news about deep seek success made the rounds the stock market completely crashed Black Rock ETF specifically targeting tech companies massively plummeted in just a few hours tech companies like nvidia's market value dropped by almost $593 billion as its shares fell by 177% it was a one-day loss record for Wall Street it was almost double the previous record which funnny enough was also set by Nvidia however
wasn't just AI focused tech companies suffering the losses infrastructure is a major factor behind the development of AI and tech companies need to ensure that they have enough power for their data centers as such people started investing in energy companies expecting that demand to increase as AI development continued however with deep seek it showed that the energy demands might not be actually needed in the future and future tech companies really might not need so much power just like how the original computers used to take up an entire room and now we can just use far
more advanced computers with the to of a finger could potentially mirror the energy consumption needed with AI so apart from investors losing money why does any of this actually matter well it goes far beyond just AI itself and more towards a tipping scale and geopolitical power Just As Trump announced a major $500 billion AI Venture dub Stargate or to level up the AI infrastructure in the US deep seek stuck a sword in their side at exactly the right time almost suspiciously timed with the US looking like it had the very clear lead in the AI
War deep seek proved that matter what the US tries to do to hold China back from the AI industry they're an enemy that shouldn't be ignored at all in almost the exact same way as the space race did in 1957 the Soviet Union launched spotnik 1 the first artificial satellite to orbit Earth and it forced America to rethink space dominance and similarly deep seek forces the AI Giants in the US to rethink their grip on Innovation and this is the perfect moment for China whose economy is in shambles right now to finally grab the spotlight
from America just as Tik Tok seems to be banned at the same time and and yet if we thought Tik Tok was bad as a national security risk DC could be on a whole other level knowing the amount of data that goes through chat gbt about every single person around the world what could this look like in the hands of the Chinese government I mean the app clearly follows CCP imposed restrictions something that was made very evident by its refusal to discuss sensitive topics like tianan Square as it flat out refuses to say anything bad
regarding China as a whole and with millions of Americans immediately downloading this app to their devices it just showed the potential of what AI under the ccp's control could look like in the future something the US government is trying to avoid with drastic measures already the US government is in many ways labeling this a potential security risk with the White House Press Secretary explaining that the National Security Council is reviewing the app's implications as for the National Security implications I spoke with NSE this morning they are looking into what those may be and when I
have an update I will share it with you Mike however the biggest impact this will have is on AI itself as deep sea car one has changed the AI industry as we know it but the real question is was all of this planned and if so why is this being done well to understand this we first need to ask where did deep seek actually come from not just the surface level story so where did deep seek actually come from of course the story that first started circulating was your classic Underdog tale some random Geniuses working
for some no-name company made a better version of chbt all for a tiny fraction of the cost the news coming out at pretty much the exact same time as openai announced a $500 billion investment in data centers only made things so much worse like most these things the story was built on a mixture of truths and Hal truths the ludicrously small $6 million cost is a good example this figure comes from the 248 high-end gpus that deep seek used to train the model calculating the cost per hour for the gpus over the two months they
spend training the AI model is where this comes from while it is massively lower than open ai's costs it still doesn't factor in for the man hours the infrastructure they needed to develop the thing and everything else the idea of deep seek being this product to some graduate Engineers working out as some basement as also falls while it's a relatively new and small company as far as AI goes it's still a fully integrated arm of China's larger tech industry deeps itself is a subsidary of a Chinese hedge fund called high flyer whose co-founder lean Wang
fing also found a deep seek as an L focused offshoot of the main company with 9.4 billion in assets under management by the main hedge fund it's not a small company by any means highl itself is also an AI company founded in 2016 by Leon and to of his fellow graduates the FM began trading using AI algorithms to play the Chinese stock market by being one of the most effective funds on the scene they grew incredibly quickly even early on in their history their returns were reportedly 20 to 50% higher than other funds in one
of the rare interviews they've actually given to the public last year the CEO said that their success didn't lie in specific techniques or strategems instead it was all down to their research and how they generally use the data being ahead of the curve meant they could exploit gaps in other training algorithms and pounce on gaps in the market to do this of course they needed a lot of data infrastructure and some insanely powerful supercomputers in 2020 for example they unveiled a computer they called Firefly 1 which cost around $28 million just one year later they
built the second version which cost five times as much and since then they've only gotten more powerful and more expensive you can expect deeps had access to this infrastructure when they made that LM even if the machine they built it on was relatively weak it's pretty doubtful to say they didn't use their pairing companies massive amount of data and computing power while building a model that especially needs all of that still what they made outperforms trat GPT on some key levels all while being far more efficient in how much computing power and energy it uses
it's a nmare for open AI of course who have both praised the model whilst also alleging that they stole their data and their intellectual property to make it it's quite a rich and hypocritical accusation coming from them open AI pretty much stole and copied the entire internet to make that model so there won't be many people shedding tears now they've gotten a taste of their own medicine it also puts into doubt the need for the $500 billion investment into AI that open AI had been so excited about in an interview conducted on the 22nd of
January with the Wall Street Journal openai's product Chief was completely certain about how much the industry needed in the first minutes of the interview he emphasized their importance with these words I mean literally everything that we see is that the more compute we apply the the better our models get and we don't see that tailing off and so we want to make sure that we have enough compute to do what we think is going to be necess NE to build products for everybody around the world over the next 10 years well just days later and
it seems like more comput isn't the only deciding factor and throwing more money at the same problem isn't the ultimate solution especially when some Chinese hedge funds can make a better version as a side project it doesn't look good anymore but like with many Chinese apps not everything is as it seems with deep seek although the company makes some extremely bold claims on how it was created and how it currently Works many are still questioning the reality of the situation according to the CEO of scale AI one of the largest AI companies in the world
there's reason to believe deep seek have intentially lied about their use of Nvidia gpus since it would prove they haven't followed us export restrictions the scale AI CEO personally believes that they've been using 50,000 Nvidia h100 chips but employees are told to keep quiet about this fact you know the Chinese Labs uh they have more h100s than than uh people think you know the and these are the highest powered Nidia chips that they were not supposed to have yes the my understanding is that is that deep seek has about 50,000 h100s um which they can't
talk about obviously because it is against the export controls that the United States has put in place and I think it is true that you know I think they have more chips than other people expect but also on a go forward basis they are going to be limited by the chip controls and the export controls that we have in place and a $6 million cost is simply impossible e Nidia h100 costs over $225,000 making the GPU costs over billions alone and while this hasn't been confirmed ELO musk also said it's obvious but even if this
is true it still downplays everything about how deep seek R1 works and it begs the question if deep seek is indeed using Nidia chips maybe Nidia stock prices should have gone way up and not down while this whole thing has been awful news for NVIDIA open Ai and a ton of other American companies it's great news for China because whenever a Chinese tech company gets big enough the Communist Party takes notice as it gets larger they then get more and more involved with the management of all of it small startups operate under the radar and
are free to innovate while the big Wells like 10cent Bown are pretty much just arms of the state if deep seat takes off which it already has then it will be taken over by the CCP soon enough it's an inevitability which is great news for China's economy of course they're decades into a massive population crisis growth has been leveling off for years because the working population is slowly getting older and birth rates are far below maintenance levels so far X's reaction to this has been to encourage insanely long working hours to squeeze everything he can
out of the people even with Chinese government agents going around door too making sure people having enough babies everyone knows that a decline is coming though and it's led to a hugely toxic atmosphere across China especially with the looming trade tariffs that Trump's going to impose if they're going to support their aging population deal with us sanctions and a general authy taking over their entire economy they'll have to be at the top of the power when it comes to technology and while they've been catching up for a few years this new development shows they're finally
beginning to pull ahead of the us in many ways it's the only thing that can really save China from suffering the same fade that Japan has dealt with Decades of near recessions and very little growth the US knows this as well and they've been incredibly quick to make the same moves they've been making when other Chinese apps take off especially when they try to out compete American ones the US Navy has already banned deep seek for its service people citing security issues whether this app is actually spying for China or not is really unknown right
now but the mere suggestion plays right into the US's hands and helps to reverse the hundreds of billions that got wiped off the nas
