China’s DeepSeek has shaken up the AI world with the release of an open-source AI model that reportedly outperformed OpenAI’s in several benchmarks. Even more startling is the company’s claim that its AI technology was developed for only $5.6 million.
This figure has raised eyebrows, especially as companies like OpenAI and Anthropic have spent hundreds of millions annually to develop their large-language models. Meanwhile, tech giants such as Microsoft have guided for an $80 billion expenditure in 2025, and Meta has projected spending between $6 billion and $65 billion this year, much of it directed toward Nvidia’s GPUs.
As an investor in OpenAI and Anthropic through Fundrise, as well as an owner of most of the U.S. big tech stocks, DeepSeek’s performance has me intrigued.
Necessity Is the Mother of Invention
Founded in 2023 by Liang Wenfeng, a former chief at AI-driven quant hedge fund High-Flyer, DeepSeek has adopted an open-source approach to AI development. This strategy enables the global developer community to inspect, enhance, and innovate upon its software.
DeepSeek claims its R1 model matches or exceeds OpenAI and Meta’s leading products in benchmarks like AIME 2024 (mathematical tasks), MMLU (general knowledge), and AlpacaEval 2.0 (Q&A performance). It also ranks highly on UC Berkeley’s Chatbot Arena leaderboard. All of this is hard to believe with such limited resources.
The company’s mobile app, launched in early January 2025, quickly rose to the top of iPhone download charts in countries like the U.S., Australia, and the U.K. What partly sets DeepSeek apart is its AI model, R1, which explains its reasoning before delivering responses—a key differentiator from competitors like OpenAI’s ChatGPT.
How did a small startup with fewer than 200 employees and a budget that’s half of what many personal finance enthusiasts consider ideal for retirement manage to compete effectively with U.S. giants? The answer might lie in necessity. When something becomes imperative, innovation often follows.
Do Whatever It Takes To Survive
As a parallel, consider Financial Samurai, a two-person team (my wife and me) operating on a modest budget yet managing to compete effectively against sites with large teams of writers, editors, and freelancers. I wrote this article from 4:30 am – 6:15 am PST while on holiday skiing in Palisades, Lake Tahoe because I needed to.
If we ever lost everything and needed to rebuild our net worth by earning millions online to support our children, I’m confident we could. There is nothing a parent wouldn’t do for their children.
However, if Financial Samurai were to perform at the same level as DeepSeek, it would be like this site generating as much traffic as The New York Times—a media giant with ~1,700 journalists and 5,800 total employees. Such an achievement would be virtually impossible, which is why I find it hard to believe DeepSeek only spent $5.6 million without receiving substantial support from the Chinese government.
The Other Side of the Coin
U.S.-based Alex Wang, the 28-year-old CEO of Scale AI, told CNBC:
“The Chinese labs have more H100s than people think,” referring to Nvidia’s GPUs, which are restricted from export to China. “My understanding is that DeepSeek has about 50,000 H100s—which they can’t talk about, obviously, because it violates U.S. export controls.”
The logical conclusion seems to be that DeepSeek has far more resources than it’s disclosing to the public. Once the initial panic subsides, those with insider knowledge will likely reveal the true extent of DeepSeek’s capabilities and support.
What I Think Will Happen And How I Plan To Invest In An AI War
It’s clear no U.S. AI company will sit idle while their future—and fortunes—are at stake. Here’s what I predict:
- The U.S. will embrace open-source AI models for greater efficiency and faster innovation, including that of DeepSeek’s.
- Nvidia and other AI chip manufacturers may face a temporary decline of up to 20-25%, followed by a rebound as AI adoption accelerates thanks to Jevon’s paradox. The Jevons Paradox states that, in the long term, an increase in efficiency in resource use will generate an increase in resource consumption rather than a decrease.
- The Trump administration will take additional measures to protect the U.S. AI industry. Its announcement of a $500 billion AI infrastructure investment—led by Oracle, OpenAI, and SoftBank—signals how seriously the U.S. views this race.
- Big tech stocks like Microsoft, Meta, Amazon, and Palantir could drop by up to 10-15%, but they’ll rebound as lower AI costs lead to higher profits down the road.
In light of these trends, I’m buying the dip in U.S. big-cap tech stocks and private AI companies. Lower costs mean greater AI adoption and ultimately higher profitability for these companies.
Apple stands to be one of the biggest beneficiaries of DeepSeek’s advancements. With its massive ecosystem and relatively late entry into heavy AI CAPEX spending, Apple is well-positioned to capitalize on lower costs, increased AI adoption, higher future earnings, and improved customer satisfaction. I’m also talking my book as Apple is my largest public stock holding.
Real Estate May Also See An Uptick in Demand
If the S&P 500 faces a prolonged 10%+ slump over the next 3–6 months, Treasury bond yields will likely decline as investors seek the safety of risk-free returns.
Lower Treasury yields would, in turn, lead to reduced mortgage rates, driving greater demand for U.S. real estate. This could remind investors of the growing disconnect between residential commercial real estate values and the stock market since early 2023. Additionally, many may revisit the idea of converting volatile stock market gains into tangible assets, like real estate, that offer both stability and everyday utility.
I’ll continue dollar-cost averaging into the S&P 500, private AI companies, big tech, and residential real estate. It’s precisely during moments of market panic that disciplined investing becomes most critical. When you focus on long-term goals—whether retirement or securing a future for your children—deploying capital during downturns becomes much easier to do.
One thing is certain: the AI and investment landscapes are evolving rapidly, creating both risks and opportunities for those who stay informed.
Readers, what are your thoughts on DeepSeek’s open-source AI model? Do you believe the company truly spent just $5.6 million to compete effectively with the likes of OpenAI, Anthropic, Google, and Meta? Is this the beginning of the end for the Magnificent 7, or do you think U.S. big tech will innovate their way through the challenge? And with the current panic selling, how are you deploying your capital?
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If you’re looking to gain more exposure to AI, as I am, check out Fundrise’s venture capital product, which invests in private AI companies. I’m dollar-cost averaging in over the next three years. Fundrise is a long-time sponsor of Financial Samurai.
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