SPECIAL REPORT: Did China's DeepSeek Just Pop The AI Stock Bubble? | Charles Hugh Smith

**Adam Taggart** (0:01)
All right, we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host. Thank you for joining me for this special report.
Right at the end of last week, the world was rocked, I think it's fair to say, by the release of a new Chinese AI platform named DeepSeek. And it has thrown a lot into question about the future of the AI ecosystem, and then by association, the financial markets, which are heavily revolving around all the market cap that's been priced into the AI stocks, the Magnificent 7, if you will. So to help make sense of this for the layman, I thought I'd have this special report just to explain what we know so far, and then to talk about what the potential implications of Big Seek are both for the AI ecosystem, but also for the financial markets in general. And to do that, I have asked my good friend and mentor Charles Hugh Smith to join me. Charles, how are you doing?

**Charles Hugh Smith** (1:01)
Good, Adam. Thank you very much for inviting me to talk about this super hot topic.

**Adam Taggart** (1:06)
Well, thank you. And folks, I mentioned Charles there as one of my mentors. He and I talk fairly regularly on the phone this weekend while I was taking my dogs out for a long two-hour walk. I spent all that time talking with Charles about the potential implications of Deep Seek. And so I thought he'd be a great guy to bring on and really just for us to sort of rehash the highlights of what we were talking about. Charles, I'll also let folks know, this has obviously caught our attention. If you've been on X at all over the weekend, you realize it's caught the world's attention. I reached out to Fred Hickey, who many regular viewers of his channel have seen me interview on Technological Matters. I have invited him to come on the program as well. When he has something he wants to share with the world, I believe he's still just heads down making sense of all this and will first let his premium subscribers know, but then I'm hoping he may come on this channel. I will say he has gone public on X, saying that he thinks this is a seminal event in the AI industry and shares a lot of the concerns that Charles and I are about to talk about with you here. All right, Charles, well, look, I guess first, let's just sort of recap for folks. Let's say somebody was away on a long weekend, hadn't heard about DeepSeq until they hopped on this call. Why is DeepSeq so noteworthy? Why is it such a potential game changer here?

**Charles Hugh Smith** (2:33)
That's a great intro, Adam. And I want to just preface by saying that you're the one that saw the potential here for the classic Black Swan, the disruptive event that no one anticipated. And so you alerted me, and then I started digging around as a result of that. And then my readers started helping me find resources. And so it's a team effort to understand something, this consequential. And so there's a lot of stuff out there already, and a lot of it is great stuff. And so what we're trying to do is summarize what's already out there. The basic idea here is that the US approach to AI was sort of brute force. You know, use super fast, super costly, super energy consuming hardware, you know, processors to process vast amounts of data quickly with high precision. And that was viewed as a monopolistic kind of moat. In other words, like, if you didn't have billions of dollars to invest in this hardware, then you were out of the race. You know, you were going to be a loser in the AI global race. And so now what DeepSeq has shown, which shouldn't surprise anybody that knows much about software, and I don't claim to be an expert, but you know, I'm an observer, is that they've relied on clever software rather than super fast hardware. And so this opens the door to getting the same results without the super costly, super energy consuming, super expensive hardware. And so that's where the revolution is. And the point I would start with here is, DeepSeek has issued their products as open source. So in other words, their software is available for people to examine. And so this is going to be used by many other smart people.
They're going to start innovating along these same lines. And so this is not the end game here.
It's the start of a whole new approach to AI.