Week of March 3, 2025
Deepseek-R1, a Chinese AI model that allegedly has comparable performance to existing AI models at a fraction of the cost (in dollars AND electricity), was released a little over one month ago. Despite Deepseek’s success, US tech companies continue to invest billions in AI infrastructure. Why? Because as AI progresses towards more complex ‘Reasoning’ models, more electricity and computational power are needed vs. conventional AI ‘inference’ models. Additionally, as AI becomes cheaper to use, we will see demand for its services rise (as will the demand for electricity and advanced chips). This may justify the lofty valuations of US Tech companies, but investors will need to see results. There are no changes to our Signals this week.
Michael Mullenax, CFP® & Bob Bilkie, CFA
