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DeepSeek is a name that now lives in infamy as the catalyst that wiped trillions from the value of share markets, primarily in artificial intelligence (AI) but also in data centers and energy companies.

As the dust settles, questions are being asked on the credibility of DeepSeek’s claims that it was able to train R1 for millions rather than billions it costs for U.S. counterparts. The market reaction was swift and broad with AI and AI-related stocks all taking a material hit to valuation. While the news, if true, is bearish for picks and shovel plays like NVIDIA, we believe the market reaction in some names was unfounded and is offering buying opportunities.

Noteworthy, the counter argument to the DeepSeek Effect is the Jevons Paradox which posits that decreases in the price of technology results in larger adoption and an overall increase in consumption of the resource.

What is the DeepSeek Effect?

The DeepSeek Effect refers to an AI breakthrough by a Chinese company that claims to have cut AI training costs by over 97% compared to industry leaders like OpenAI. If validated, this advancement could accelerate AI adoption, disrupt infrastructure-heavy players, and create new winners in the AI space.

What This Means for Investors

• AI Compute Costs Plummet: Companies relying on AI engines could see higher profit margins as computing becomes dramatically cheaper.
  
  
• Market Overreaction = Opportunity: Some AI-related stocks have seen selloffs based on fear, creating undervalued opportunities for strategic investors.
  
  
• Shift from 'Picks & Shovels' to AI Users: While hardware suppliers may face challenges, companies leveraging AI for real-world applications stand to benefit.

Want the Full Picture?

The DeepSeek Effect has triggered major volatility in AI-related stocks, but this is just the beginning. As the market adjusts, savvy investors who grasp the bigger picture could unlock significant opportunities. Our latest exclusive research report covers:

✅ A comprehensive analysis of the DeepSeek Effect and its implications for AI stocks
✅ Key opportunities arising from the market shake-up
✅ ASX-listed companies poised to benefit from lower AI computation costs

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