The stock market was rocked over the past weekend by the announcement of a new artificial intelligence system called DeepSeek, which threatens the business models of the entire U.S. AI industry.  The chipmaker Nvidia saw its stock price fall 17% on Monday, and analysts immediately questioned the value of billion-dollar-plus investments in AI by OpenAI, Softbank and Oracle.

What is DeepSeek and why did it send shockwaves through the AI community?

The short answer is that the Chinese engineers who founded DeepSeek arrived at a more efficient way to manipulate the fantastic amount of information and computer processing power necessary for AI to function.  Instead of using one massive system trying to know everything about everything, DeepSeek broke up its analytical engine into AI specialists—known to techies as ‘inference time computing.’  While traditional models like GPT-4 use 1.8 trillion calculations at every moment, answering every query and request all at once, DeepSeek only has to expend 37 billion at a time, each focused on a specific set of queries.  The specialists can be trained more far more cheaply, they are twice as fast and use 75% less memory.

Put in dollar terms, DeepSeek has 200 employees, vs. 4,500 at OpenAI.  DeepSeek was developed for roughly $5 million, compared with the $6.6 billion capital raise for OpenAI.

DeepSeek is open-source, which means anyone can build on it—and it will rapidly take market share away from the clumsier AI systems in today’s market.  But it also uses a model that others can copy—breaking down different types of projects, queries and models into smaller, more nimble AI specialists.

The selloff of Nvidia came when tech experts (and analysts who talk with them) realized that AI services can be offered without the need for massive raw computing power—the kind of chips that Nvidia specializes in.  

However, DeepSeek does use Nvidia chips as part of its server array.  And there is no reason to imagine that the international AI cohort of developers can’t pivot to the new model and gain new efficiencies that nobody had thought of before.  Already, Alibaba has announced a similar model; its 2.5-Max AI model, with an array of specialists, claims to be faster and more efficient than DeepSeek.  

DeepSeek is not the end of the AI boom, but did manage to prick what some saw as an AI bubble.

 

Europe Lagging

 

The U.S. economy grew at a 2.3% pace in the last quarter of 2024, which is not far from the longer-term average, and not a sign of recession.  The situation is very different in Europe.

The most recent economic numbers show that the Eurozone as a whole recorded zero growth in the fourth quarter of last year, and less than 1% for the year as a whole.  Germany’s GDP fell 0.2%, France and Italy were flatlined.  This comes after the European Central bank cut interest rates four times in the past year, which normally would have produced at least moderate stimulus.  

The prognosis going forward is uncertain and somewhat pessimistic, given the near-certainty that the Trump Administration will impose tariffs on European goods and services (particularly automobiles and agricultural products) being sold into the world’s largest economy.  Nobody has yet predicted a recession, but continued stagnation is not off the table.

 

Homes Here and Abroad

 

Buying a home in America is just too darned expensive, what with today’s rapidly rising home prices.  Right?

You might be surprised to know that, according to a somewhat complicated calculation, U.S. homes, on average, are among the most affordable in the world.

To come to that conclusion, the Best Brokers organization calculated how many months of average income, in each country, it would take to buy a 1,076 square foot home—a modest residence by U.S. standards, but in some areas this is a bit luxurious.  The average American would have to pay the equivalent of 76 months of total income to buy that house.  In South Africa, that figure falls to 71 months.

Those were the lowest totals in the survey—by a fair amount.  Canadians would pay an average of 179 months of income, while Mexican citizens, south of the border, would spend 211 months of income on the same size home.  The UK: 202 months.  Italy: 184 months.  India (where the average wage is a lot lower): 578 months, topping Indonesia (563 months).  China and Japan came in at 177 and 455 months, respectively.  In Turkey, it would require 52 years and six months of average wages to buy a house that size.

As mentioned, the calculations can be tricky, requiring an estimate of the average cost of a home (which obviously varies depending on location) and the average wage of workers in each country.  The ranking also took into account real mortgage rates, which means the interest rates in each country and also the inflation rate.  Argentina is not listed, because the country’s astronomical inflation rate means that the typical home mortgage rate is, after-inflation, negative 175.89%—and, of course, runaway inflation has an uncertain impact on home prices as well.

So if you hear somebody complain about how unaffordable American homes have become, you might suggest that they check out the affordability of homes elsewhere in the world.

 

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