While that all sounds exciting, last week concluded with a ton of news circulating around DeepSeek R1. In case you missed it, the summary is that a Chinese lab effectively built ChatGPT at like 1/10 or 1/20th of the cost using far less compute (GPU’s). While I am by no means an AI expert, it does seem possible that the valuation of certain AI related companies and data center spend is at least somewhat, if not entirely, dependent on models needing more and more computation power and GPUs.
I don’t know but it might be time for me to actually know what these things all mean: parameter-efficient fine-tuning, quantization, smaller models, open-source models, in-context learning and transfer learning.
It’s also interesting that some reports indicate that DeepSeek was trained on Q&A and other data that their engineering team generated from ChatGPT rather than by pulling huge datasets. Speaking of ChatGPT / OpenAI they obviously remain in the news related to StarGate and their recently announced AI Agent called Operator.
Whatever the DeepSeek news actually means, it’s probably fair to say that it caused some form of collective freak out on parts of X.
Since it’s a FOMC decision week, I thought I’d share a Fed related quote today, Tuesday and Wednesday. Can you identify which Fed Chair said the below? Post your guess in the comments.
“How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
As it relates to this week’s FOMC Meeting, the common thinking on the meeting is something along the lines of the following:
The Fed is expected to hold their policy rate at 4.25% - 4.50% and likely say nothing too definitive as it relates to the March meeting.
There will probably be a lot of questions about tariffs and the Fed’s potential reaction function should meaningful tariffs be enacted before the March meeting.
More questions around the restrictiveness of policy.
I wonder if there will be much talk about “financial conditions” and “wealth effects”.
Of course we know where Trump stands on rates, he wants them lower and he believes lower oil prices are going to be a major factor to help get them there.
Last week concluded with BoJ raising their policy rate to 0.5%, the highest since 2008 and signaling the possibility that they may need to do more. Away from central banks, the international forex market remains focused on tariff news.
On the week ahead:
Monday: New home sales, 2Y and 5Y Auction
Tuesday: Durable goods, 7Y Auction
Wednesday: BoC, FOMC
Thursday: Jobless Claims, ECB, GDP (4Q Advance)
Friday: PCE
XTOD: A world in which human wages crash from AI -- logically, necessarily -- is a world in which productivity growth goes through the roof, and prices for goods and services crash to near zero. Consumer cornucopia. Everything you need and want for pennies.
XTOD: Is DeepSeek the biggest threat to US equity markets? The company seems to have built a groundbreaking AI model at an extremely low price and without having access to cutting-edge chips, calling into question the utility of the hundreds of billions worth of capex being poured into this industry.
XTOD: I don’t know if this Deepseek narrative is true or not, but it does underscore the leapfrog risk in technology investing. The hyper-capex AI model will start getting more (justified) questions.
XTOD: DeepSeek’s first reasoning model has arrived - over 25x cheaper than OpenAI’s o1
Highlights from our initial benchmarking of DeepSeek R1:
➤ Trades blows with OpenAI’s o1 across our eval suite to score the second highest in Artificial Analysis Quality Index ever
➤ Priced on DeepSeek’s own API at just $0.55/$2.19 input/output - significantly cheaper than not just o1 but o1-mini
➤ Served by DeepSeek at 71 output tokens/s (comparable to DeepSeek V3)
➤ Reasoning tokens are wrapped in <thinking> tags, allowing developers to easily decide whether to show them to users
Stay tuned for more detail coming next week - big upgrades to the Artificial Analysis eval suite launching soon.
XTOD: Real payoffs vs. no payoffs. If you are frightened of debasement of your currency, you probably should reduce your currency holdings, or holdings of any nominal assets that yield fixed payoffs in your currency and buy real assets, claims to 'real' payoffs that increase with inflation. You probably should not stock up on securities that yield no payoffs.
XTOD: Most people wait too long to go into action, generally out of fear. They want more money or better circumstances. You must go the opposite direction and move before you think you are ready. It is as if you are making it a little more difficult for yourself, deliberately creating obstacles in your path. But it is a law of power that your energy will always rise to the appropriate level. When you feel you must work harder to get to your goal because you are not quite prepared, you are more alert and inventive. This venture has to succeed so it will.
https://x.com/pmarca/status/1882993091784880557
https://x.com/knowledge_vital/status/1882862738780697020
https://x.com/RealJimChanos/status/1882808370081771912
https://x.com/ArtificialAnlys/status/1882454212556259369
https://x.com/HannoLustig/status/1882255560894304570
https://x.com/RobertGreene/status/1883213250801947018
That's Ben Bernake.
ReplyDeleteThe quote from the 27th was Greenspan as you'll see in the post on the 28th. Better luck on the next one.
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