Could DeepSeek Topple US Tech?
On Monday morning Nvidia has traded down as much as 7% in the pre-market and the Nasdaq 100 futures are down 3% as we write. Meanwhile Hong Kong tech stocks were in a better mood, rallying overnight.
There are fears that DeepSeek’s latest R1 AI model could be better and cheaper than using Nvidia’s pricy chips, and perhaps even on a par with Open AI’s o1 model - but charging a fraction of the cost. Similarly, Chinese tech companies trade on much lower valuations than US mega cap tech.
If investors do want to call time on the Nasdaq’s amazing multi-year rally – it is up 20 fold since the 2008 Great Financial Crisis – the ETF industry is happy to oblige with easily accessible products.
Imminent China AI launches tracked by Ultumus include Yinhua SSE STAR Artificial Intelligence Index ETF, GF SSE STAR Artificial Intelligence Index ETF and E Fund SSE STAR Artificial Intelligence Index ETF. They are being launched alongside a number of passive index trackers following the A500, A50 and SSE 180 indices, which will also have some exposure to Chinese technology and AI.
Though the US has use sanctions to try and prevent China from buying advanced AI chips, this might have been a blessing in disguise if it forced the Chinese to develop their own, possibly superior, AI models.
At first sight, DeepSeek appears to boast multiple ingredients for massive disruption: it may be more accurate, it is more transparent, it uses less computer power, which also means less electricity, and it employs less people.
Currently Asia’s ETF industry is much smaller than Europe or the US, but that could change rapidly if capital is redeployed from US technology into Chinese tech ETFs.