Episode 78: DeepSeek's AI Revolution - How Will This Impact Nvidia? Netflix v Disney Cage Match, the Rise and Fall of Tesla, and is the Bubble of Borrowed Time
The guys discuss China's incredible DeepSeek developments - is it for real and how will it impact Nvidia's dominance. Is Disney too cheap now? Tesla's disastrous quarter and the leveraged ETF market.
The Contrarians catchup
Adir is shocked at how little consumer choice we have in Australia compared with Israel, a much smaller country by population, in places like supermarkets.
Up to 50% of consumers in the US are revolving a credit card (borrowing money repeatedly up to a set limit while repaying instalments). Adir: “People have gone crazy again on debt.”
Adir was impressed with India’s version of MILKRUN: Blinkit, a hyper-local delivery company that can deliver anything in minutes (which is so impressive when you consider the scale).
Australia and the US essentially have identical inflation and interest rate numbers at the moment. Adam and Adir might be the only people in Australia who don’t want a rate drop.
Adir watched the new movie about Donald Trump’s early life (‘The Apprentice’; 3.5/5) and an Indian romantic comedy called ‘3 Idiots’.
He also read a few books: ‘The Happiest Man on Earth’, ‘Guarded by Dragons: Encounters with Rare Books and Rare People’, and ‘The Hill of Enchantment’.
DeepSeek’s AI Revolution
Of the 10 biggest one-day stock drops, eight of those can be attributed to Nvidia (Amazon and Meta own the other two), with a huge US $600B drop last week following the news of DeepSeek being created for less than $6M.
DeepSeek is open source, free to use, and rocketed up the charts to be the most downloaded app on the Apple App Store when the news broke of its sophistication.
DeepSeek’s efficiency breakthrough has shown comparable model performance at 1/45th of the compute cost, suggesting Nvidia’s customers are burning cash unnecessarily.
Adir: “I think the true cost of processing of the American companies and the Chinese companies is gonna be quite similar. And I think ultimately what this shows is that sanctioning the supply of chips to China is probably not gonna be the answer that the Americans are looking for to this problem.”
Adam: “OpenAI, in my view, is worth zero. I think Sam Altman's the greatest jazz hands guy in history.”
Adam: “It's a massive hallucination, huge circle jerk. All these big companies have gone, ‘Let's just give each other money’.”
Disney v Netflix
Adam looked at the change in market caps for Disney and Netflix since 2005 and found something interesting. In the time that Disney has gone from $46M to $203M, Netflix has gone from $3M to 415M.
Adam: “Here’s my contrarian view: sell Netflix, buy Disney.”
Adir: “The current value of Disney suggests they’re valued the same as Netflix per subscriber, but that would just be valuing the Disney+ business. They have totally different businesses. Disney is mostly a venues business now.”
Adir: “It would be impossible, I believe, to refute what I'm about to say. The content quality and longevity of Disney's content is vastly superior to Netflix content.”
Adam: “Disney is responsible for one of those worst acquisitions of all time with 21st Century Fox. They paid $90B and they’re worth $200B now. It’s probably worth $10B now, so they’ve just burned $80B.”
Mike: [Inaudible]
The Rise and Fall of Tesla
Tesla is on track (Adir: “When Elon Musk is talking, what does ‘on track’ mean?”) to roll out new, cheap electric models in the first half of this year.
In Tesla’s recent reporting, their profit and revenue fell short of expectations.
Adir: “Tesla is a religion. Trump is the king and Tesla is the state. And Elon is the cardinal or Pope or whatever you want to call him. And I think if people really sour on Trump, only then will Tesla fail.”
Adir: “It's one of the worst automotive businesses in the world, in my opinion.”
Adam: “I think Tesla's more overvalued than Nvidia.”
Five other stories worth following:
As discussed, markets were reeling after Chinese AI firm DeepSeek released a highly regarded chatbot it claims it built on $5.6M. Though DeepSeek could still pose a legitimate threat to Big Tech’s AI supremacy, a little debunking work from research firm SemiAnalysis puts DeepSeek’s total spending at ~$1.3B.
Perplexity, a leading startup in AI search, is facing an alleged trademark violation over its name, given Perplexity Solved Solutions, an HR software provider founded in 2017, applied for the trademark in October 2021.
US President Trump announced he would impose heavy tariffs on the US’ three largest trading partners: 25% on imports from Mexico and Canada (though only 10% on Canadian energy products) and 10% on Chinese imports in what he described as retribution for the flow of migrants and drugs into the US.
With her 99th Grammy nomination (a record), Beyoncé took home album of the year for ‘Cowboy Carter’, which also was honored with best country album. Kendrick Lamar took home record of the year and song of the year for ‘Not Like Us’.
US Treasury Secretary Scott Bessent granted Elon Musk and members of his DOGE team access to a system responsible for trillions of dollars in government payments, including Social Security checks and tax refunds.